Month: June 2016

Submitted by Mark Nestmann via Nestmann.com,

I love technology. I can’t imagine life without modern conveniences like telephones, email, and the Internet. Not to mention running water, air conditioning, and automobiles.

But sometimes, technology gets… well, creepy.

And the creepier the technology, the more likely your friendly Big Brother will use it to keep tabs on you. A case in point is the increasing sophistication of face recognition technology.

Face recognition combines digital images of faces with -software that creates a unique “faceprint” of each one, along with a database of images against which “faceprints” can be compared.

A few years ago, face recognition systems were almost laughably inaccurate. I have an article in my archives from 2003, in which two Japanese tourists visiting Australia fooled an early version of the technology simply by swapping passports.

However, this strategy wouldn’t fool today’s face recognition software.

In the US, you generally have no right to privacy with respect to your facial features. And no federal law regulates the collection of biometric data. If you’re in a public place, the courts have concluded you have a greatly reduced expectation of privacy. Anyone with a camera can legally take your picture in a public space.

But the rules for face recognition are beginning to change, thanks to laws in a handful of states and a court decision involving one of the largest collections of faceprints in existence, compiled by Facebook. Earlier this month, a federal judge in California refused to dismiss a class action lawsuit against Facebook brought by residents of Illinois. The lawsuit alleged Facebook collected, stored, and used faceprints in violation of the Illinois Biometric Information Privacy Act (BIPA). The law is intended to protect the privacy of Illinois residents in their personal biometric data. Regulated biometric identifiers can include a scan of “face geometry.”

Facebook uses face recognition technology to match photographs users have uploaded to subsequently present “tag suggestions” for digitized images uploaded later. Subscribers can then “tag” friends or family members. At first glance, it seems completely harmless, especially since you can turn off “tagging” in your Facebook settings. But the Illinois plaintiffs didn’t see it that way at all.

And the fact is Facebook has the largest single collection of images ever assembled. More than one billion Facebook users had uploaded more than 250 billion pictures by 2013, and the total number today is undoubtedly much higher. Of course, not all the photos are of faces, but many – perhaps most – are.

But what’s the real harm in allowing companies like Facebook to assemble vast face databases to make “tag suggestions”?

Consider FindFace, a face recognition app now taking Russia by storm. FindFace allows users to photograph people on the street, in a bar, or anywhere else and identify them by matching the photos to digital images uploaded to VK, a Russian social networking site. VK has about 200 million users – large, but not nearly as big as Facebook. The developers claim the system is 70% reliable in identifying the right person, with each version of the app improving accuracy. Apparently, FindFace can’t match photos posted on Facebook, at least not yet.

The really creepy part is the way the app has already been used – and abused. FindFace makes it possible for stalkers to harass individuals on the street who have VK profiles. The founders – 20-something males – envision being able to take a photo of an attractive woman, match her photo to a VK profile, and then ask her out on a date. But they believe the real breakthrough for their company will come when law enforcement authorities adopt it. They claim police have already used FindFace to locate criminal suspects who had seemingly disappeared.

It turns out that something similar and even creepier is already underway in the US. But instead of Facebook, authorities are using a database you can’t opt out of or turn off – archives of state driver’s license photos. State and local police and the FBI all use face recognition software to scan state driver’s license records to track down fugitives. And as part of the “Real ID Act,” states must digitize driver’s license photos, making it possible for face recognition software to sift through millions of photos in search of a match.

Several companies have developed systems that allow police to search these facial archives. The systems consist of a handheld face recognition device that plugs into a smart phone, and they’re being used by an increasing number of police departments nationwide.

It’s easy to see how this technology could be abused, and not just by stalkers. Let’s say you’re in a public demonstration against the ruling party that gets out of hand. Police identify the participants with face recognition and then arrest them at their leisure. Not to mention whistleblowers and those who support political causes or social issues that aren’t approved of by most Americans.

It’s not easy to protect your privacy against this technology, but I do have a few suggestions.

• Don’t renew your driver’s license until it expires. Photos taken more than a decade or so for driver’s licenses aren’t necessarily in digital form and are harder to match. A few states even allow you to cite your religious beliefs to avoid having a photo appear on your driver’s license at all.

• Unsubscribe from Facebook and other social networks. If you use these networks, don’t post photos of yourself.

• Wear head coverings. A hat will prevent a camera above you from capturing a clear image of your face, unless you look at it. If you’re a Muslim woman or don’t mind dressing as one, a burqa will obscure your entire face.

• If you’re a man, grow a beard. Like hats or other head coverings, a beard – at least a full one – hides enough of your face to make face recognition more difficult.

One thing is for certain. The technology underpinning face recognition will only improve. Be ready for it by acting proactively.

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With regulators and local authorities unable or unwilling to crack down on the unprecedented housing bubble in select Canadian cities, increasingly used by Chinese oligarchs to park hot cash offshore, the local banks are starting to take action into their own hands. Case in point, Bank of Nova Scotia has decided to ease off on mortgage lending in Vancouver and Toronto due to soaring prices, Chief Executive Officer Brian Porter said.

“We’re a little concerned about housing prices in the greater Vancouver area and Toronto,” Porter, 58, said Tuesday in an interview on Bloomberg TV Canada. “We just took our foot off the gas the last couple quarters in terms of mortgage growth for the reasons I cited, in terms of Vancouver and Toronto.”

Nationwide home sales in April jumped 10.3 percent from a year earlier, the most activity for that month and the second-highest level ever, according to the Canadian Real Estate Association. In Vancouver, prices rallied 25 percent in the month to an average of C$844,800 ($643,000) and sales climbed 15 percent. Toronto prices jumped 13 percent to C$614,700 and sales rose 7 percent, the association said.

The dramatic rebound in Canadian real estate, driven almost entirely by foreign money is shown below.

 

Then again, while Porter did tacitly admit that soaring housing prices are a threat, he also added that “generally, Canadians have a strong ability to self regulate and they’ve demonstrated that before.”

That may be in doubt, because none other than the OECD itself rang a alarm bells over the frothy nature of the Toronto and Vancouver housing markets and high levels of consumer debt. “Very low borrowing rates have encouraged household credit growth and underpinned rapidly rising housing prices, particularly in Vancouver and Toronto, which together are a third of the Canadian housing market,” the Organization for Economic Co-operation and Development warned again today in its latest outlook quoted by the Globe and Mail.

“In relation to household incomes, both house prices and household debt are high,” it added, throwing more fuel on the fire for those who are fretting over bubble fears. “Macroprudential measures have strengthened recently but should be tightened further and targeted regionally.”

But the loudest warning was the OECD’s assessment of a “disorderly housing market correction,” notably in Toronto and Vancouver, as the biggest threat to Canada’s economy.“ This would damp residential investment and private consumption, and could threaten financial stability.”

The G&M adds that the group didn’t suggest specific measures, but states that “both Ottawa and British Columbia have acted.”

Which we find odd because also today the same Globe and Mail wrote an article explaining that the top bureaucrat overseeing the real estate sector in B.C., Carolyn Rogers admits she did not realize how wildly speculative Vancouver’s market had become until an explosion of public outrage earlier this year.

Rogers is B.C.’s superintendent of real estate, a job she has held since 2010. Now, she sees houses trading like hot commodities – and it worries her. Ms. Rogers says hearing how buyers and sellers have been burned keeps her up at night. “What we have in Vancouver is absolutely extraordinary circumstances. The regulations for real estate … I don’t think contemplated the idea that houses would be traded like stocks,” Ms. Rogers said. “You will always be accused of one of two things if you are a regulator. You will be accused of acting too soon … or you will be accused of being asleep at the switch.”

Rogers has been in high gear since revelations in The Globe about shadow flipping and other shady practices by realtors. Immediately after the first story broke in February, the government assigned her to oversee an advisory group to figure out how to curb wrongdoing. She said the group has heard enough to conclude real estate regulation needs a major overhaul. For example, she says it will recommend multiplying maximum fines for misconduct by several thousand dollars.

Rogers is CEO of the Financial Institutions Commission, the provincial regulator that enforces securities law. She has little jurisdiction over licensed realtors. That is because the province handed regulation of licensees over to the Real Estate Council of British Columbia a decade ago, after the industry lobbied to regulate itself. Ms. Rogers’ office can only investigate unlicensed activity in real estate and can challenge the real estate council’s decisions, although that rarely happens.

“We have a consumer-confidence issue for sure,“ Ms. Rogers said. “I think if you measured consumer confidence right now, if you measured skepticism, people feel like they are not being treated fairly. That’s a big problem.”

She acknowledges one of the trickiest challenges is what some see as the elephant in the room in Vancouver’s rapidly expanding real estate industry. Many new realtors conduct all their business in Mandarin, which creates language barriers. Ms. Rogers points out that people from other countries also bring new business models, which sometimes clash with Canadian rules and expectations.

What she did not explicitly call out is the ongoing tidal wave of hot Chinese money flooding into Canada.

There is stil hope for Canada’s housing market: if regulators finally act and stop the offshore-based buying frenzy, the market correction may be “orderly.” Unfortunately, macroprudential measures never work before the bubble bursts, and since prices are going up, the complaints of the many are drowned out by those few who have money, power and connections. It is only after the crash that the rich but vocal minority is finally silent. Sadly, by then it is too late.

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Having previously explained how China's hard landing has begun, former ABN AMRO chief investment stratgist Richard Duncan warns of a "severe and protracted" slump is ahead as "this enormous gap between investment and consumption means China’s economy is now wildly unbalanced."

Duncan has published a series of videos explaining why, in his opinion, China’s economic development model of export-led and investment-driven growth is now in crisis.

“Perhaps not since the Pharaohs built the pyramids with slave labour has investment made up such a large share of a country’s economy and household consumption made up so little,” Duncan said. “This enormous gap between investment and consumption means China’s economy is now wildly unbalanced.”

Underscoring the scale of China’s reliance on investment as an engine of growth, consider how much it has ramped up spending in this area in just a few short years, compared to that of the US, the world’s largest economy. In 2014, investment in the US was US$177 billion higher than 2007, a growth rate of 6%. In 2014, the level of investment in China was US$3.2 trillion more than it was in 2007, representing growth of 236 per cent.

The South China Morning Post brings you the second video in that series (part 1 here).

 

A former Hong Kong-based banking analyst, Duncan has also worked as an analyst at the World Bank, and as global head of investment strategy at ABN AMRO Asset Management in London. He has authored three books on the global economic crisis, including The Dollar Crisis: Causes, Consequences, Cures. He is now chief economist at the Singapore-based hedge fund Blackhorse Asset Management. Duncan was also a speaker at last week’s Asian Leadership Forum in Seoul, South Korea. The South China Morning Post was a media partner to the event. He runs the blog Macro Watch, a subscription-based website providing analysis on global economic trends.

Source: The South China Morning Post

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Nearing the end of his presidency,  glorious leader Obama came out today in what was hailed his “economic victory lap.”

So 8 years after his election into office and after the worst financial crisis in history, Obama comes out to tell us everything is great and better because of him. Well, apparently he and his team of propaganda artists have yet to look at any actual economic data to see how the U.S. economy and the average American have fared during his tenure. 8 Years after the crisis and after his election, the U.S. Federal Funds rate is sitting at 0.25bps, with a Federal Reserve who has recreated asset price bubbles in home values, stocks, art and in many other asset classes, and who is afraid to hike by a measly .25bps. The average american has fared far worse than what economists and even our president tells us. With the middle class fast becoming a relic, spending thousands on home rent a month because they can’t afford to buy a home, leasing cars with sub-prime terms of up to 72 months, who have little to no savings and who are not experiencing wage growth to compete with the rise in costs of everyday items.  Meanwhile thanks to the last 8 years of disastrous policies, from the Federal Reserve and from the Obama regime, income inequality is at a record. There have been a few articles just this year that really should make ones eyes pop out of their heads. The first was from the WSJ in January, where it said that a $500 car repair bill would send most Americans scrambling. The article went on to say that only 37% of adults would have the necessary savings to cover a $500 car repair or a $1000 emergency room bill.  Another article from the Associated Press in May, said that two-thirds of Americans would struggle to cover a $1000 crisis. What was most disturbing about this article, was that it said that even among the wealthiest 20% of Americans (making more than $100K/Year), 38% of them said they would have a difficult time coming up with $1000! The latest disturbing article came just last week, where it was said that more young Americans (age 18-34) are now living with their parents that at any other time since the Great Depression. And people wonder why millennials are not getting married at the same rate as previous generations, and are so pessimistic on their outlook. They are graduating college into arguably the worst economic conditions in U.S. history. They are going to school and getting pointless degrees while saddling themselves in tens of thousands of dollars in student loans, only to end up working as a waiter or bartender. So below are just a few charts that show the true state of the U.S. economy and how the average American is feeling:

 

 

 

 

 

 

 

 

 

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Submitted by John Whitehead via The Rutherford Institute,

As the grandfather of three young ones, ages 5 to 9, I get to see my fair share of kid movies: plenty of hijinks, lots of bathroom humor, and an endless stream of slapstick gags. Yet even among the worst of the lot, there’s something to be learned, some message being conveyed, or some aspect of our reality being reflected in celluloid.

So it was that I found myself sitting through The Angry Birds Movie on a recent Sunday afternoon, doling out popcorn, candy and drinks and trying to make sense of a 90-minute movie based on a cell phone video game that has been downloaded more than 3 billion times.

The storyline is simple enough: an island nation of well-meaning, feel-good, flightless birds gets seduced by a charismatic green pig and his cohort who comes bearing food, wine and entertainment spectacles (the Roman equivalent of bread circuses). Ignoring the warnings of one solitary, suspicious “angry” bird that the pigs are up to no good, the clueless birds eventually discover that the pigs have stolen their most precious possessions: their eggs, the future of their entire society. It takes the “angry bird” to motivate the normally unflappable Bird Nation to get outraged enough to do something about the violation of their trust by the pigs and the theft of their personal property.

While one would be hard-pressed to call The Angry Birds Movie overly insightful, it is, as The Atlantic concludes, a “feather-light metaphor for our times… The film functions, effectively, as a fairy tale: It uses its status as fantasy to impart lessons about reality.”

It turns out that we’re no different from the wine-guzzling, food-noshing, party-loving Bird Nation. We too are easily fooled by charismatic politicians bearing gifts. And we too are easily distracted as those same politicians and their cohorts rob us blind.

Case in point: while presidential candidates continue to distract us with spectacular feats of chest-thumping, browbeating and demagoguery, the police state continues its steady march onward.

All of the revelations of government wrongdoing, spying and corruption disclosed by NSA whistleblower Edward Snowden seem to have fallen on deaf ears.

Nothing has improved or changed for the better.

There has been no real reform, no significant attempts at greater transparency, no accountability, no scaling back of the government’s warrantless, illegal domestic surveillance programs, and no recognition by Congress or the courts that the Fourth Amendment provides citizens with any protection against unreasonable searches and seizures by government agents.

In fact, as I point out in my book Battlefield America: The War on the American People, we’ve been subject to even more obfuscation, even more lies, even more sleight-of-hand maneuvers by government agencies determined to keep doing what they’re doing without any restrictions on their nefarious activities, and even more attempts by government agencies to listen in our phone calls, read our emails and text messages, monitor our movements, and generally imprison us within an electronic concentration camp.

It’s no coincidence that almost exactly three years after Snowden began his steady campaign to leak documents about the government’s illegal surveillance program, Congress is preparing to adopt legislation containing a secret provision that would expand the FBI’s powers to secretly read Americans’ emails without a court order.

Yes, you read that correctly.

The government is planning to push through secret legislation that would magnify its ability to secretly spy on us without a warrant.

After three years of lying to us about the real nature of the government’s spying program, feigning ignorance, dissembling, and playing at enacting real reforms, it turns out that what the government really wants is more power, more control and more surveillance.

A secret provision tacked onto the 2017 Intelligence Authorization Act will actually make it easier for the government to spy on Americans’ emails as well as their phone calls.

If enacted, this law would build upon the Patriot Act’s authorization of National Security Letters (NSL) which allows the FBI to secretly demand—without prior approval from a judge and under a gag order that carries the penalty of a prison sentence—that banks, phone companies, and other businesses provide them with customer information and not disclose the demands to the person being investigated or even indicate that they have been subjected to an NSL.

As if the FBI didn’t have enough corrupt tools in its bag of tricks already.

NSLs—in existence since the 1970s—empower FBI operatives to delve into Americans’ most personal affairs based only on the say-so of an agency that has come to be known as America’s Gestapo, or secret police. Incredibly, all the FBI needs to assert in order to justify such a search is that the information sought is relevant to a national-security investigation.

Clandestine requests. Broad powers. Minimal insight. Intimidation tactics.

That’s how the FBI’s use of NSLs are described, but it can easily be applied to the government-at-large and its voracious quest for ever-greater powers without any real accountability to the citizenry or any adherence to the rule of law.

It’s estimated that the FBI issues approximately 40,000 to 60,000 such NSLs per year and that number is growing.

Incredibly, Barack Obama criticized President Bush for his administration’s mass government surveillance programs only to fully embrace them once he himself had attained the White House. Indeed, the Obama administration has been lobbying for years to expand the FBI’s use of NSLs to include emails.

Now, here we are, eight years later, and we’re still being treated like the gullible birds in The Angry Birds Movie, easily pacified with bread, easily distracted by circuses, and easily robbed of our most precious possessions—our freedoms, our privacy and our right to have a government that abides by the rule of law and answers to us.

There are many ways of reacting to this latest news about the government’s treachery.

You can subscribe to the simplistic, head-in-the-sand routine and do as one of my so-called Facebook “friends” suggests and just obey the law, hoping that it will keep you out of the government’s clutches, but that’s no guarantee of safe passage. Of course, that will mean knowing the law—federal, state and local—in all of its convoluted, massive, growing permutations, understanding that overcriminalization has resulted in the average person unknowingly committing three crimes a day.

 

You can insist that such concessions to security are making us safer, even though facts suggest otherwise. Barring a few notable exceptions, the politicians are singing the same tune: security at any cost. Yet this whole line of reasoning is hogwash. Government spying isn’t making us safer, but it is making us less free. As NSL whistleblower Nicholas Merrill points out, the terrorist attacks in Paris were carried out by individuals “communicating without the use of any type of security or encryption. They were speaking in Facebook groups and using regular text messaging on their phones, without taking any steps to cover their tracks or make it harder to listen in on what they were doing. To me this proves that the whole dragnet surveillance system that we’ve built is actually useless, because it didn’t help us at all to prevent that type of attack.”

 

You can cast your ballot for one of the many slogan-spouting politicians who are long on lies and short on loyalty to their constituents. Every one of the members of the Senate Intelligence Committee who voted for this legislation is a traitor to their oath of office and should be booted off that committee. What’s more, any member of Congress who votes for this legislation should be sent packing back to where they came from. It’s our job to make them toe the line when their thinking goes awry.

 

Or you can stop drinking the happy juice, stop believing the politicians’ lies, stop being so gallingly gullible and out to lunch, and start getting angry. In our politically correct, feel-good, play nice culture, anger has gotten a bad rap, but there’s something to be said for righteous anger acted upon in a nonviolent, effective fashion. It’s what Martin Luther King Jr. referred to as “military nonviolent resistance.” It means caring enough to get off your caboose, get on your feet and get actively involved in holding government officials accountable to the simple fact that they work for “we the people.”

It’s not an easy undertaking.

The government has been playing fast and loose with the rules for too long now, and its greed for power and riches is boundless.

Still we are not powerless, although the government’s powers grow daily. We have not yet been altogether muzzled, although the acts of censorship increase daily. And we have not yet lost all hope for restoring our republic, although the outlook appears bleaker by the day.

For the moment, we still have some small allotment of freedoms by which we can express our displeasure, push back against injustice and corruption, and resist tyranny. One Texas man, outraged at being fined $212 for driving 39 in a 30 mph zone, chose to pay his fine with 22,000 pennies. It was a small act of disdain in the face of a government machine that tolerates little resistance, but it was acts such as these that sowed the early seeds of resistance that birthed this nation.

As revolutionary patriot Samuel Adams observed, “It does not take a majority to prevail… but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men.”

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Seemingly missed by the mainstream media on Monday, Chinese equity futures crashed over 12.5% – the biggest drop since 1995 – only to soar back to unchanged within seconds. This was not a 'fat-finger' trade, and as one trader noted, "liquidity in the market is really thin right now," which is borne out by the evidence. Thanks to government rules disabling "hedging" accounts from holding more than 10 contracts a day, volume (and liquidity) has become practically non-existent since September and so the 12.5% flash crash was driven by just 3 trades totalling just 646 contracts which means a mere $92 million sell order collapsed Chinese equity markets by the most on record.

A shocking move…

But when we zoom in it is apparent that just 3 trades were responsible for the plunge – the initial 398 contract sell, followed by a 107 contract order and a 141 sell all at 22:42:10

As background, we note that a hedging account is a designation for investors who use futures to offset risks from their holdings in the stock market. Such accounts are exempt from limits on opening more than 10 contracts in a day, according to CFFEX rules announced in September… so this could only be a hedging account.

In other words just 646 contracts – or 'hedging' around $92 million notional  – managed to crash the Chinese futures market by the most on record.

And here is why…  Chinese policy makers restricted activity in the futures market last year because selling the contracts is one of the easiest ways for investors to make large wagers against stocks. Volume shrank by more than 90 percent from its peak after officials raised margin requirements, tightened position limits and started a police probe into bearish wagers.

Yes that is the real volume chart.

Some international traders with negative views on Chinese stocks have shifted their wagers to offshore markets. As we noted previously, short interest in Chinese ETFs is now at record highs…

 

Which could be why Chinese stocks are stubbornly ignoring the collapse of the currency…

 

As Bloomberg notyes, while sudden price swings are hardly unique to Chinese exchanges, the country’s markets have come under increased scrutiny in recent months as MSCI Inc. considers adding mainland shares to its international indexes. Recent measures to curb trading halts and clarify beneficial ownership rules have improved the country’s odds of inclusion to 70 percent, Goldman Sachs Group Inc. analysts wrote in a report on Tuesday, which was one of the factors behind the market’s rally. MSCI will announce its decision next month… and we are sure a record intra day crash in prices will have no impact on the political decision to bring Chinese equity volatility into the world's biggest benchmarks.

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By EconMatters

We look at the OPEC Meeting on 6/2/2016 with a focus on the technicals and likely policy outcomes. Watch out, and don`t get leaning the wrong way like a rookie; often it is buy the rumor and sell the news.

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Jeff Gundlach has reason to celebrate: as of today, his DoubleLine capital, founded less than 7 years ago, now manages $100 billion in assets, a key milestone for the fund – recall that Pimco’s Total Return Fund made major headline when it sunk under $100 billion just last September. As Reuters reports, the DoubleLine open-end mutual funds collectively posted a net inflow of $1.48 billion in May, bringing the 2016 net inflow to $9.05 billion. The DoubleLine Total Return Bond Fund, the largest fund by total assets of DoubleLine, had a net inflow of about $919 million in May, for a year-to-date net inflow of $7.20 billion.

Which is perhaps surprising: unlike most other bond managers, DoubleLine has not hidden his skepticism of the market, and has not been generally unsupportive of the path central bankers have taken since the financial crisis. However, that has not prevented him from getting numerous key calls right, leading to substantial outperformance among his peer group. In fact, only recently he said the he is “sticking with my ‘2 percent upside and 20 downside’ prediction on U.S. stocks…. it’s working, I can see it going to 1,600.” He reiterated his caution in his latest interview today with Reuters when he said on Wednesday that financial markets are extremely vulnerable to a “pretty good cocktail” of three factors: The Federal Reserve raising interest rates, the labor market weakening and Republican presidential candidate Donald Trump.

“You’re going to have the Fed raising rates, the labor market is already softening and you’ll see ‘scare’ articles about Trump that read, ‘If you vote for this guy, we will go into depression’,” Gundlach said.

As for equities, Gundlach said the S&P 500 Index has been struggling to reach and stay above 2,100, mirroring the slowish growth in the United States. “It’s like people think that the Fed has this super-secret information about how strong the economy is about to become or that the economy is about to become smoking hot.” Gundlach added: “The S&P 500 has exhibited declining highs for over a year, with two big drawdowns. This is ‘dead money’ with massive anxiety.”

Gundlach may have been surprised by Yellen’s Friday speech at Harvard when the Fed chair turned decidedly hawkish, something Gundlach did not anticipate. This is what he said “Yellen is clearly less dovish than she was in March. But I watch the Fed and it is as if they have to ask the market about raising rates: ‘Please, please, Can we raise rates?’.

Which is, of course, true as the infamous BofA “Nightmarish Merry go round” demonstrated two weeks ago:

One thing Gundlach, however, was correct in his assessment that the latest move higher in stocks was a short squeeze. As the latest JPM Prime Brokerage securities lending report shows, the cumulative daily market value change of shorting and covering activities in the company’s PB portfolio across ETFs and Equities in the last week was virtually entirely due to sharp covering comparable to that seen in the March-April period.

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The tape faces four big catalysts/events between now and probably the end of the year according to JPMorgan:

1) The Fed.  Do they move in June or Jul?  The former has the Brexit problem on June 23 (although the odds of an “out” vote have declined enormously) and the latter lacks a press conf.  Will two hikes this year (one in the summer and another ostensibly in Dec after the elections) spark another steep rally in the USD or will currency markets stay calm?;

 

2) China FX – the CNY hit a high of ~6.60 vs. the USD earlier in the year, rallied to ~6.45 as of the end of Mar, and has since rebounded to ~6.58.  It isn’t so much the absolute level that investors watch (although that is clearly important) but instead the pace of weakness that is most important (Aug saw a sharp devaluation and that repeated around the end of Dec/early Jan).  The messaging from Chinese officials suggests they will avoid additional sudden 1x devaluations but further CNY weakness should be expected (JPM is assuming 6.63 by the end of Q3 and 6.75 by the end of the year);

 

3) Japan policy – the surprise adoption of NIRP on 1/29 was a major negative not only b/c it drove a global sell-off in bank stocks but also as it undermined central bank confidence in general.  The BOJ is likely gearing up additional action (at either its 6/16 or 7/29 meeting) and it will be important for it avoid a repeat of 1/29;

 

4) US elections – the consensus expectation right now assumes a Clinton victory but current trends suggest such an outcome is far from certain.  Hillary hasn’t even secured the Democratic nomination and appears headed for a very acrimonious convention.  The GOP meanwhile is quickly unifying behind Trump and recent polls are pointing to a very close election in Nov.  Note that control of the Senate is very much up for grabs this year too (the House seems safely in Republican hands). 

*  *  *
In the meantime, stocks have never been more expensive… Price-to-Sales has never been higher:

Positioning is extreme…

And complacency is high…

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