Month: July 2016

"Here's Debbie." Like a scene from The Shining, she's back. Having been utterly exposed as the Sanders-screwing, Clinton-colluding primary-rigger by the DNC's leaked emails, Wasserman Schultz made her first public appearance since her 'resignation' telling the National Jewish Democratic Council that "sometimes you just have to take one for the team." Our question – which team is that?

As The Hill reports,

Debbie Wasserman Schultz, the outgoing chairwoman of the Democratic National Committee (DNC), said Thursday that "sometimes you just have to take one for the team."

 

"This has been a difficult week, there's no question about it," Wasserman Schultz said in remarks at a reception hosted by the National Jewish Democratic Council, the first time she's spoken publicly since announcing she would step down as chairwoman.

 

"It has been a remarkable team effort, and you know sometimes you just have to take one for the team, and that's OK, it's OK," she said with a smile.

Our simple question is – exactly what team is that Debbie? Are you not supposed to represent the 'people' who prefer a 'Democratic' party politik? Just ask the Sanders' supporters… were they on the 'team'?

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Nothing else matters… “bad news is great news”

A sprinkling of VIX smashing, some algo-driven oil flares, ignore Yen – that’s last week’s news, and the worst annual GDP growth since 2010… a perfect recipe for record high stocks prices.

Now what though? VIX bounced as we hit high stops.

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Submitted by Peter Schiff via Euro Pacific Capital,

Theodore Roosevelt’s famous mantra “speak softly and carry a big stick” suggested that the United States should seek to avoid creating controversies and expectations through loose or rash pronouncements, but be prepared to act decisively, with the most powerful weaponry, when the time came. More than a century later, the Federal Reserve has stood Teddy’s maxim on its head. As far as Janet Yellen and her colleagues at the Fed are concerned, the Fed should speak as loudly, frequently, and as circularly as possible to conceal that they are holding no stick whatsoever.

Roosevelt's "stick" was America’s military might, which in his day largely boiled down to the U.S. Navy, which he had enlarged and modernized. To demonstrate to a potential adversary that he was prepared to use these weapons, Roosevelt sent the fleet around the world in a massive show of force. However, he took care to couch the expedition in soothing rhetoric. He even ordered the battleships to be painted white to create the impression that they were angels of mercy rather than instruments of power. The combination proved effective. America’s global influence increased dramatically during his presidency even though few shots were fired.

The “sticks” that Janet Yellen is supposedly ready to employ are interest rate increases that are needed to help normalize the economy, fight inflation, and to stockpile ammunition to combat the next recession. Yet, in the last decade interest rates have essentially been fixed at zero. In fact, since the end of 2008 the Fed has raised rates a grand total of once…last December, by just one quarter of a percent. But what they have lacked in action they have more than made up for with torrents of talk. As a result of this “Loud Talk Policy,” American economic prestige in the 21st Century has fallen faster than it rose in the Roosevelt presidency.

Ever since the Fed finally wound down its quantitative easing programs back in 2014, the big question became when it would “normalize” interest rates, bringing them back to the three to four per cent levels that had been in place for much of the past century. Over that time, the Fed has issued countless statements, both officially and unofficially, that discussed why, when, and how fast it will raise interest rates. Never before have so many words been spilled and parsed over a policy development that never had any chance of coming to fruition.

The simple truth, I believe, is that the Fed can’t raise interest rates because its previous use of massive monetary stimulus to keep the country out of recession has created an economy that is hopelessly dependent on overly accommodating policy just to tread water. An economy is a physical thing. If it inflates too much, it must contract for balance and health to be restored. The Fed has committed itself to prevent that.
 
When the dotcom bubble crashed in the late 1990’s, the Fed and the Federal government inflated a much bigger bubble in housing to replace it. That produced some superficially good years, but the party couldn’t last forever. When that larger bubble popped in 2008, the government promptly blew up an even larger bubble in bonds, stocks, and real estate simultaneously to replace it. After six years and many trillions of dollars of purchases of treasury and mortgage-backed bonds (through its bailout and quantitative easing programs), the Fed has brought long term bond yields down to almost nothing, which has helped juice corporate profits, encouraged consumer borrowing, and re-ignited another increase in home prices.

Since there has been historically low growth in productivity and business investment over the past eight years, these rising asset prices appear to be the only pillars that support our otherwise anemic economy. The Fed must know that any significant increases in interest rates could knock out these pillars, toppling the phony recovery, and perhaps bringing on another recession that it would be hard-pressed to stop. I believe the Fed is much more aware than the typical Wall Street economists that the economy, as currently constituted, would have a difficult time handling interest rates that are even within shouting distance of normal.

But the difficult part for them is that they can never really admit that they find themselves in this trap. The Federal Reserve is now the country's primary economic cheerleader. Given how much weight the public ascribes to every utterance of the Fed, to admit that the economy is weak would be to create a self-fulfilling prophecy. So instead of keeping silent and acting decisively as TR would have done, the Fed talks in circles and does nothing. They talk over one another, sometimes saying the same thing, sometimes appearing to pull in opposite directions. Sometimes they just talk while saying nothing at all.

This week’s Fed statement is just the latest in a seemingly endless string of announcements that are meant to convey a sense of optimism and a feeling that some action is getting closer, even though nothing is actually likely to happen. When the statement was issued, Wall Street expressed little concern that the Fed had done nothing for the fifth consecutive meeting, but took immediate notice that the Fed had concluded that “risks to the economy had diminished.” To many, this meant that the next increase in rates could come as soon as the next meeting in September. Yet they have been saying versions of this for the past two years, and it resulted in one lone December rate hike, which was followed by the biggest January stock market rout in more than a century. (Ouch, Matt Phillips, Melvin Backman,1/20/16)

There are any number of economic or political developments that could occur in the next six weeks that could easily provide the Fed with yet another convenient excuse not to hike, without having to admit the real reason for its inaction. Last time it was Brexit. Before that, it was a weak jobs report. Before that, it was market chaos in China. The bar keeps getting lower and they will always find something. Unfortunately, the media talking heads and the Wall Street mutual admiration society keep enabling them to continue the pantomime.

But the show can not go on forever. There is no way to know when a little dog might pull back the curtain and reveal the truth behind the illusion. Should that happen, the absence of a stick will prove to be a huge problem for the entire nation.

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Now that the narrative of rising gasoline demand and a “strong summer driving season” is finally over, courtesy of gasoline stocks that just refuse to drop…

… and a glut in PADD1 that has never been greater…

… defenders of the “bull” crude oil thesis are stumped. “Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end,” Stephen Brennock of oil brokerage PVM, said.

So with no fallback “story” both WTI and Brent are down 20% since their last peak in June, as another bear market for oil has arrived.

Worse, earlier today we got confirmation that another parallel narrative, namely that OPEC is cutting its production, is also dead and buried.  According to a Reuters survey, OPEC’s oil output is likely in July to reach its highest in recent history, as Iraq pumps more and Nigeria manages to export additional crude despite militant attacks on oil installations. Top OPEC exporter Saudi Arabia has kept output close to a record high, the survey found, as it meets seasonally higher domestic demand and focuses on maintaining market share rather than trimming supply to boost prices. Supply has been rising since OPEC abandoned in 2014 its role of cutting supply to prop up prices as major producers Saudi Arabia, Iraq and Iran pump more.

According to the survey, OPEC supply rose to 33.41 million barrels per day in July from a revised 33.31 million bpd in June.

There’s more: OPEC’s production could rise even further should talks to reopen some of Libya’s oil facilities succeed. Conflict has been keeping Libyan output at a fraction of the pre-war rate. “This could shortly release more oil into an already abundantly supplied market,” Carsten Fritsch of Commerzbank said, although earlier hopes of a restart have not been realized. “It therefore remains to be seen whether this time will be different.”

It won’t be different.  As Reuters notes, OPEC’s output has climbed due to the return of former member Indonesia in 2015 and another, Gabon, this month, skewing historical comparisons. July’s supply from the remaining members, at 32.46 million bpd, is the highest in Reuters survey records, starting in 1997.

In July, the biggest increase of 90,000 bpd has come from Iraq, which has exported more barrels from its southern and northern ports despite a pipeline leak that restrained southern exports.

 

Nigeria, where output has been hit by militant attacks on oil facilities, has nonetheless exported slightly more in July than June, the survey found, although crude exports remain significantly below the 2 million bpd seen in early 2016.

 

Output in two major producers is largely stable. Iran, OPEC’s fastest-growing source of supply expansion this year after the lifting of Western sanctions, has pumped only 20,000 bpd more as the growth rate tops out for now, the survey found.

 

Saudi output in July was assessed at 10.50 million bpd, close to June’s revised rate and the record 10.56 million bpd reached in June last year.

And yet, despite the return of the record OPEC oil production, crude is now higher on the day, for one simple reason: oil is inversely correlated with the dollar. And thanks to today GDP shock, which showed that the US economy grew far slower than expected, the dollar has crashed.

As Bloomberg further adds, “WTI erases losses as dollar extends declines.“

Confused? Don’t be: it adds that “Dollar weakness follows disappointing U.S. GDP data, consumer confidence, according to Phil Flynn, senior market analyst at Price Futures Group in Chicago.”

In other words, the worse the US data, the better for oil.

And with S&P correlation algos today programmed to only track the oil price signal, this means that after sliding shortly after the GDP report, the S&P500 is now back at intraday highs, and on pace to hit new all time highs.

To summarize: bad economic news -> weak dollar -> higher oil -> record S&P500.  Rinse, repeat.

And that’s how terrible news is great news again.

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A 13-point lead for Hillary Clinton on July 14 has vanished in two weeks with Donald Trump now leading in the polls by 1 point. This is clearly unacceptable to the establishment and so Reuters/Ipsos is taking matters into its own hands… and 'tweaking' its polling methodology.

Trump has seena yuuge bounce since Comey and the convention as Clinton's bounce was marginal…

Something has to be done.. So Reuters "tweaked" their algos…

In a presidential campaign notable for its negativity, the option of “Neither” candidate appears to be an appealing alternative, at least to participants in the Reuters/Ipsos opinion poll.

 

Many voters on both sides have been ambivalent in their support for Democratic nominee Hillary Clinton and Republican nominee Donald Trump, complicating the task of the pollsters trying to track the race.

 

That sentiment may help explain an apparent skew that recently emerged in the Reuters/Ipsos poll results. Given the choice, a relatively large group of voters opted for “Neither/Other” candidate compared with other major polls, leading to an underreporting of several percentage points for one or other of the two major contenders at times in the race.

 

As a result, Reuters/Ipsos is amending the wording of the choice and eliminating the word “Neither,” bringing the option in line with other polls.

Tests found eliminating the word “Neither” from the “Neither/Other” response increased Trump support by between 3 to 5 percentage points on any given day leading up to the Republican convention. It also increased Clinton’s support, but by a smaller margin.

Since the convention, however, Trump’s support seems to have solidified among wary supporters. Now, the “Neither” issue appears to be affecting Clinton in the survey.

But while Trump's numbers had been hurt by the "neither" question, the results of testing its removal shows a notably bigger negative bias towards Trump appears among Hispanics, College-Educated, and young voters:

As Reuters explains, in our view, the inclusion of the word “Neither” is capturing Soft Trump supporters who, if given such an option, prefer not to make a choice. Here it is important to note that the soft supporter phenomenon also affects Clinton, but to a much lesser degree.

Reuters/Ipsos poll currently has Trump 40.2%, Clinton 38.5%, but, Reuters reports, eliminating "Neither" from the "Neither/Other" answer produced a different result. In that case, Clinton was ahead, 40% to 36%.

 The amended Reuters/Ipsos tracking poll will be published later Friday.

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As ArmstrongEconomics' Martin Armstrong rages, Merkel refuses to admit that she is wrong and will not reverse her refugee policy despite all the problems, attacks, rapes, and terror.

This is the precise reason why career politicians are no longer acceptable. They will never defend the people nor will they ever admit a mistake. All we see is more and more attacks and this one politicians is threatening to destroy the very framework of Europe. We will see more and nations raise borders and if Germany wishes to take in millions, they will have to keep them all for themselves. She is making a decision for all of Europe and this amounts to a completely undemocratic position whereby no citizen of any other member States has any right to object or vote her out of office.

And as The Gatestone Institute's Soren Kern details, Chancellor Merkel said she knows that Germans are worried about their personal safety: "We are doing everything humanly possible to ensure security in Germany," she noted, but added, "Anxiety and fear cannot guide our political decisions."

• "The chancellor remains committed to her current course of action. A classic Merkel refrain follows: 'There must be a thorough analysis.'" — Thomas Vitzthum, political editor of Die Welt.

• "The country is split, its citizens deeply insecure? 'We can do it!' Sexual assaults on women in swimming pools and at festivals? 'We can do it!' Terrorist attacks by Islamists in Germany? 'We can do it!' Growing frustration and rising political apathy among the population? 'We can do it!' But who are the 'we'? … Not a word to the citizens who for a year have had to deal with the consequences of the asylum onslaught. Not a word to the local communities that are unable to cope with the financial and burdens of accommodating asylum seekers." — Editorial in the newspaper, Junge Freiheit.

German Chancellor Angela Merkel has rejected criticism of her decision to allow more than a million mostly Muslim migrants to enter Germany last year.

Speaking at an annual summer press conference in Berlin on July 28, a defiant Merkel ignored critics of her refugee policies and insisted there would be no change to her open-door migration stance. She also said she bears no responsibility for a recent spate of violent attacks in Germany.

Germany has been rattled by an axe attack on a train in Würzburg, a mass shooting in Munich, a machete attack in Reutlingen and a suicide bomb in Ansbach — all within a week.

The attacks, which left 13 dead, were all carried out by Muslims: Three of the attacks were carried out by asylum seekers and one by a German-Iranian who harbored a hatred of Arabs and Turks.

Merkel, who interrupted her summer holiday to attend the 90-minute press conference, which was pushed forward by a month, reiterated her credo: "We can do it!" ("Wir schaffen das!"). She has repeated the phrase over and over since Germany's migration crisis exploded on September 4, 2015, when she opened up the German border to tens of thousands of migrants stranded in Hungary. She said:

"We decided to fulfill our humanitarian obligations. I did not say it would be easy. I said back then, and I will say it again now, that we can manage our historic task — and this is a historic test in times of globalization — just as we have managed so much already, we can do it. Germany is a strong country."

Merkel said the goal of jihadists was to "divide our unity and undermine our way of life. They want to prevent our openness to welcoming people. They want to sow hate and fear between cultures and also among religions."

The chancellor said she knows that Germans are worried about their personal safety: "We are doing everything humanly possible to ensure security in Germany," she noted, but added, "Anxiety and fear cannot guide our political decisions."

Merkel also outlined a nine-point plan to increase security in Germany: 1) an early-warning system to identify radicalization among migrants; 2) an increase in staff at Germany's intelligence agencies; 3) an information technology office to focus on tracking internet communications between jihadists; 4) regular joint exercises with the police and the military to practice counter-terrorism measures; 5) expanding research on Islamic terrorism and radicalization; 6) improving European cooperation on intelligence sharing; 7) restricting the sale of weapons online; 8) a national registry to monitor people entering and leaving the country; and 9) making it easier to deport asylum seekers who break the law.

Merkel concluded by refusing to budge an inch: "For me it is clear: we stick to our principles. We will give those who are politically persecuted refuge and protection under the Geneva Convention." She added: "I cannot promise you that we will never have to take in another mass wave of refugees."

German Chancellor Angela Merkel (left) rejects criticism of her decision to allow more than a million mostly Muslim migrants to enter Germany last year. "We can manage our historic task… we can do it. … Anxiety and fear cannot guide our political decisions," she said at a July 28 press conference, adding, "I cannot promise you that we will never have to take in another mass wave of refugees."

Merkel has come under increasing criticism for her handling of the migration crisis. The anti-immigration party, Alternative for Germany (AfD), noted:

"Given the mounting, extremely serious incidents, the AfD calls on the government urgently to fulfill its duty and stabilize the security situation in Germany through effective border controls. Other steps such as the immediate and consistent deportation of offenders must necessarily follow."

The newspaper, Bayernkurier, a publication run by the Christian Social Union (CSU), the Bavarian sister-party to Merkel's Christian Democratic Union (CDU), wrote:

"Not only have Angela Merkel's policies been a stimulus package for right-wing populists, the security risks that the chancellor has created with her open borders are also abundantly clear."

The newspaper, Die Welt, said Merkel's repetition of the words "We can do it!" amounted to a "provocation" and criticized her nine-point plan as "vague." In a scathing attack, the paper's political editor, Thomas Vitzthum, wrote:

"Angela Merkel maintains her entire position. She defends her actions last year. No admission of error can be heard. Nor should anyone expect to see repentance in the future. The chancellor remains committed to her current course of action. Today is not the time to discuss what additional new measures should be taken, she says. A classic Merkel refrain follows: 'There must be a thorough analysis.'"

In an editorial, the right-leaning newspaper, Junge Freiheit, wrote that Merkel does not care about the consequences of her policies:

"The country is split, its citizens deeply insecure? 'We can do it!' Sexual assaults on women in swimming pools and at festivals? 'We can do it!' Terrorist attacks by Islamists in Germany? 'We can do it!' Growing frustration and rising political apathy among the population? 'We can do it!'

 

"But who are the 'we'? Not a word from Merkel. Not a word about the women who are victims of sexual assault in Cologne and elsewhere — the victims of those who Merkel brought into the country with her open-border policy and friendly face.

 

"Not a word to the citizens who for a year have had to deal with the consequences of the asylum onslaught. Not a word to the local communities that are unable to cope with the financing and burdens of accommodating asylum seekers. Not a word for the police, who have reached their limits thanks to unbridled immigration. Not a word for the food pantries that need to ration the distribution of food due to distribution battles. Not a word about the split in society that Merkel's refugee policy has caused — not just a split country, but also splits among families and groups of friends. Not a word that her decisions have reduced Germany's influence in Europe."

The newspaper, Bild, wrote:

"Things can only go well if the problems are really solved! In particular, the deportations of rejected asylum seekers are a major problem. For months, the government has pledged to speed up repatriations, but little headway has been made. And also for the nine-point plan to combat terrorism: let us see action rather than just waiting and talking! Because by next summer, Germans will judge Merkel on what she really has done."

A recent poll found that two-thirds of Germans oppose a fourth term for Merkel. Only 36% of respondents said they wanted Merkel and her CDU to lead the government after federal elections in 2017.

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