Month: December 2016

WACC Is Back: Getting Ready To Live In An Era Of Rising Rates

Submitted by Adam Taggart via PeakProsperity.com,

When I was fresh out of college in the mid-90s, I landed a job at Merrill Lynch. I was an "investment banking analyst", which meant I had no life outside of the office and hardly ever slept. I pretty much spoke, thought, and dreamed in Excel during those years.
 
Much of my time there was spent building valuation models. These complicated spreadsheets were used to provide an air of quantitative validation to the answers the senior bankers otherwise pulled out of their derrieres to questions like: Is the market under- or over-valuing this company? Can we defend the acquisition price we're recommending for this M&A deal? What should we price this IPO at?

Back then, Wall Street still (mostly) believed that fundamentals mattered. And one of the most widely-accepted methods for fundamentally valuing a company is the Discounted Cash Flow (or "DCF") method. I built a *lot* of DCF models back in those days.

I promise not to get too wonky here, but in a nutshell, the DCF approach projects out the future cash flows a company is expected to generate given its growth prospects, profit margins, capital expenditures, etc. And because a dollar today is worth more than a dollar tomorrow, it discounts the further-out projected cash flows more than the nearer-in ones. Add everything up, and the total you get is your answer to what the fair market value of the company is.

The Weighted Average Cost Of Capital

The DCF approach sounds pretty straightforward. And it is. But it's still much more of an art than a science. Your future cash flow stream is entirely dependent on the assumptions you bake into the model. The difference between a 5% or 15% assumed EBITDA compound annual growth rate becomes huge when projecing over 10+ years.

But one assumption in the model has far more impact on the final valuation number than any other. And it has nothing to do with the company's projected operations.

Recall that the DCF approach projects out the expected future cash flows, and then discounts them (back to what's called a "present value"). This raises a critically important question:

At what rate do you discount these future cash flows?

Well, to address this, you need to ask yourself a few questions. How will the company be financing itself? It will need to deliver an acceptable return to both its stockholders and bondholders. What kind of return can investors get out in the market for a similar investment? If they can get a better expected rate of return, or similar return with less risk, they'll put their money elsewhere. 

Enter a calculation known as the Weighted Average Cost Of Capital (or "WACC"). Again, without getting too technical on you, the WACC looks at how a company is capitalized (what % with debt, what % with equity) and what blended annual rate of return the investors who contributed that capital expect. Once you've calculated the WACC, you put that number into your DCF model as the annual discount rate and — Voilà! — your model spits out the present value for the company.

It's All About The "Risk Free" Rate

So, to recap:

  1. Companies (really, any asset with an income stream) are valued off of the present value of their discounted future cash flows
  2. This present value is highly dependent on the discount rate used

We just talked about how the WACC is commonly used as the discount rate (or, at least, its foundation). So how is the WACC calculated?

Here's its formula (Don't let it scare you; I'm not going to get all mathy on you here):

I want to point your attention to two important factors in this equation: the cost of equity (re) and the cost of debt (rd). The size of these variables has a big impact on the final number calculated for the WACC.

Re, the cost of equity, is made up of two components: the market's current "risk free rate" + the "equity premium" that investors demand on top of that to hold stocks, which have more risk. Most folks use the current yield on the 10-year US Treasury bond as the risk free rate (which has hovered around 2% for the past several years).

Similarly, rd, the cost of debt, has two components: the market "risk free rate" + the premium that the company's bondholders are charging to hold debt riskier than a Treasury bond. 

The really important thing to understand here is that both of these variables are dependent upon interest rates (most notably, the yield on the 10-year Treasury). As interest rates rise, the cost of equity goes up, and the cost of debt goes up, too.

Why is that so important? Glad you asked…

The Future Of Rising Rates (And Falling Asset Prices)

Most reading this are aware that we've been living in a falling interest rate environment for most, if not all, of our adult lives. And since the 2008 financial crisis, interest rates have been held down at essentially 0% (or even lower) by the world's central banks:

While not the only reason, this decline in interest rates has been a huge driver behind the tremendous rise in valuations across assets like stocks, bonds and real estate over the past 30-odd years.

Which begs the question: What will happen to asset prices if/when interest rates start rising again?

Well, as I hope the above lesson on the Weighted Average Cost Of Capital hammered home, when the core interest rate rises, both the cost of equity and the cost of debt go up. Mathematically, this increases the WACC used as a discount factor, thereby reducing the present value of future cash flows. Or in layman's terms: When interest rates rise so does the WACC, which mathematically makes valuations fall.

Now, we only need to care about this if we're worried that interest rates will start rising. Maybe the central banks have everything under control. Maybe we're at a "permanent plateau" of sustainable zero-bound interest rates.

Oops; or maybe not.

Remember how the "risk free rate" used in calculating the WACC is often the 10-year Treasury bond yield? Well, the yield on the 10-year Treasury started spiking last month, and is currently nearly double(!) what is was just five short months ago:

Now, it takes a little while for the higher cost of capital to ripple through the system. But we're already seeing some immediate effects, with numerous warnings of future price corrections multiplying in today's headlines.

Given their strict see-saw relationships with interest rates, bond prices are getting slammed:

U.S. Government: Bond Prices Fall as 10-Year Yield Hits 2016 High

Renewed selling pressure Thursday resulted in the yield on the benchmark 10-year Treasury closing at its highest since late December, wiping out the big drop earlier this year.

 

The yield premium that investors demanded to own the 10-year U.S. Treasury note relative to the 10-year German bund climbed to 1.99 percentage point late Thursday, the highest since 1989, the year the Berlin Wall fell. The U.S. 10-year note’s yield premium relative to the 10-year Japanese government bond also rose to the highest since January 2014.

(Source)

 

Bond Market Slide Intensifies

Rise in yields since July has pushed the 10-year Treasury note up by more than 1 percentage point

 

The worst bond rout in three years deepened Thursday, hammering debt issued in emerging markets and many U.S. states and cities, while sparing large companies the brunt of the impact.

 

The yield on the 10-year Treasury note rose to a 17-month high, at 2.444%, up from 2.365% on Wednesday. Yields rise as bond prices fall.

(Source)

The housing market has a similar see-saw relationship with interest rates, but given how less liquid homes are than bonds, it will take more time before the recent rate causes a noticeable effect on prices. That said, as expected, we are seeing an immediate impact on the market for home refinancing loans:

Mortgage Refinancings Collapse To 2016 Lows As Rates Top 4.00%

 

Mortgage applications tumbled 9.4% from the prior week as mortgage rates soared above 4.00% to the highest level since July 2015. The biggest driver of the decline in mortgage demand was a 16% crash in refinances – tumbling to their lowest level since the first week of January

 

(Source)

And the industry is bracing for a pullback as "shocked" consumers react to the spike in rates:

US Housing Market In Peril As "Increase In Mortgage Rates Has Shocked Consumers"

 

Eventually, though, rising rates make houses less affordable, and that could lead to slowing sales, price growth and mortgage activity. Some analysts are now projecting home values will decline by the end of next year in many U.S. housing markets.

 

The MBA lowered its projections for next year’s new mortgage loans by 3% last week, to $1.58 trillion. That would represent a 16% drop from the nearly $1.9 trillion in mortgages that lenders are on pace to originate this year, with refinancing accounting for all of the drop.

 

“The increase in rate has shocked consumers…I didn’t expect it either,” said Dave Norris, chief revenue officer at LoanDepot, the 10th largest mortgage lender in the U.S. by loan volume.

(Source)

Equities have yet to soften due to the rise in rates, but the recent rally kicked off by the recent Presidential election appears to have run out of steam. More importantly, an increasing chorus of venerated investors is warning that even higher rates are coming — soon. And with them, a market correction:

Druckenmiller Joins Gundlach In Predicting 6% Yields; Expects Market Correction As Rates Rise

Druckenmiller joined Jeff Gundlach in predicting that US 10Y yields may rise to 6% over the next year or two (…)
 
(…) he echoed the warning made just last night by Goldman Sachs, according to which a 10Y above 2.75% would put pressure on stocks, and said that if the 10Y rose to 3%, the S&P could see a 10% correction, but warned that the market could correct well prior to that in anticipation.
 

Even the newly-selected Treasury Secretary Steve Mnuchin agrees that higher rates are an approaching inevitability:

“We’ll look at potentially extending the maturity of the debt, because eventually we are going to have higher interest rates, and that’s something that this country is going to need to deal with."

(Source)

Prepare Now

The conclusion from all the above? Get ready to live in an era of rising interest rates. It's going to be unfamiliar territory for all of us…

What will likely happen? The unrelenting upward march in asset prices we've enjoyed over the past several decades is over. People won't be able to pay as much for stuff because the financing costs will be higher.

Falling asset prices should be in the cards. We're already seeing that with bonds, and housing and stocks should follow over the next few quarters. The higher rates go, the farther the fall should be.

The Fed will be in a tough spot as this unfolds. Right now, the Fed has little power to slow things down, as the core interest rate it sets is already nearly 0%. It will likely raise rates as it can along with the market, provided it can do so without killing the economy. There's a lot of precedent for this; historically, the Fed's interest rate has usually followed the market vs leading it. The Fed will want to gain some maneuvering room to drop rates at some point in the future if it feels it needs to.

At some point, if we risk entering a full deflationary rout, the world's central planners may well indeed pull out an arsenal of tricks similar to what we saw following the 2008 crisis. We may eventually see liquidity-injection programs so extreme that hyperinflation becomes a valid concern. But that time is not now.

For now, we recommend getting out of debt. Especially variable rate, non-self-liquidating debt (credit cards being a great example). As we've said many times, in periods of deflation, debt can be a stone-cold killer.

Be sure to have positioned your financial portfolio to take into account the risks to stocks/bonds/etc raised here. Read our primer on hedging. Read the Financial Capital chapter from our book Prosper! (we've made it available to read for free here). Talk with our endorsed financial adviser (again, free of charge) if you're having difficulty finding a good one to discuss this topic with.

And to really understand what life will be like as interest rates turn from a tailwind into a headwind for the global economy, read this report we published earlier this year, when the markets first buckled in 2016.

In Part 2: Why This Next Crisis Will Be Worse Than 2008 we look at what is most likely to happen next, how bad things could potentially get, and what steps each of us can and should be taking now — in advance of the approaching rout — to position ourselves for safety (and for prosperity, too).

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

 

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OPEC Oil Production Hits New All Time High As Brent Surges To 16 Month High

The greatest trick OPEC ever pulled was convincing the world to buy oil even as production kept rising to new all time highs. Case in point, just out from Reuters:

  • OPEC NOVEMBER OIL OUTPUT RISES 370,000 BPD MONTH/MONTH TO 34.19 MILLION BPD, HIGHEST IN RECENT HISTORY – REUTERS SURVEY
  • SAUDI SUPPLY EDGES DOWN ON REFINERY MAINTENANCE AND REDUCED DIRECT CRUDE BURNING – REUTERS SURVEY
  • OPEC OUTPUT RISE LED BY ANGOLA; NIGERIA, LIBYA AND IRAQ ALSO PUMP MORE

Meanwhile, oil rose to fresh 16 month highs, with Brent rising above $55 for the first time since mid-2015.

More details from Reuters:

OPEC’s oil output set another record high in November ahead of a deal to cut production, a Reuters survey found on Monday, helped by higher Iraqi exports and extra barrels from two nations exempted from cutting supply – Nigeria and Libya.

 

The latest rise in supply means the Organization of the Petroleum Exporting Countries will have a bigger task in complying with a plan to cut supply starting in 2017 – its first production-reduction deal since 2008. 

 

Supply from OPEC increased to 34.19 million barrels per day (bpd) in November from 33.82 million bpd in October, according to the survey based on shipping data and information from industry sources. Brent crude rose above $55 a barrel on Monday, trading at a 16-month high, on prospects of a tighter market next year following OPEC’s deal. Prices are still half their level of mid-2014.

 

“OPEC’s decision to cut production has removed a lot of downside risk for 2017,” said Bjarne Schieldrop, chief commodities analyst at SEB, even though “some cheating is a natural habit among OPEC’s members”.

Based on the November survey, OPEC is pumping 1.69 million bpd above the 32.50 million bpd production target that it agreed last week to adopt from January 2017, following an outline agreement reached in September. This means that OPEC will need to find an addition half a million barrels to scrap to reach its “promised” quota.

November’s supply from OPEC excluding Gabon and Indonesia, at 33.23 million bpd, is the highest in Reuters survey records starting in 1997. At last week’s meeting, Indonesia suspended its membership again.

In November, Angola provided the largest supply boost as  planned maintenance on the Dalia crude stream ended. Output also climbed in Iraq due to record exports, lifting supply to 4.62 million bpd in November according to the survey.

Iran, which was allowed to raise output under the OPEC deal as sanctions had crimped its supply, pumped 40,000 bpd more. Indonesian output rose by 10,000 bpd.

Libya and Nigeria, both of which are exempt from the supply cut due to the impact on their output from conflict, boosted production in November.

Among countries with lower output, the biggest drop came from top exporter Saudi Arabia due to reduced crude use in power plants for air-conditioning, and lower refiner processing, sources in the survey estimated.

The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data, and information provided by sources at oil companies, OPEC and consulting firms.

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Trump Takes Call From Taiwan President, Freak Out Ensues

On Friday, President-elect Donald Trump and Taiwan President Tsai Ing-wen talked on the phone for about 10 minutes—no president or president-elect had spoken to the president of Taiwan since the U.S. withdrew its diplomatic recognition of Taiwan in 1979.

The Chinese government lodged a formal complaint about the call with the U.S. government, calling the one China policy “the political basis of the China-U.S. relationship.” The White House reasserted U.S. support for the one China policy after the phone call. The policy is also something both major parties in Taiwan accept in principle although, like different U.S. administrations, they differ on their interpretation of what “one China” means for Taiwan’s political independence.

Many observers insisted the phone call was unprecedented; Vanity Fair suggested it and other “flippant calls” were already creating diplomatic crises. Critics said it could “alter decades of foreign policy,” The Guardian reported. Some experts did note the call could’ve been a “calculated move.”

The last few weeks have been filled with chatter about news not comporting with the political mainstream being equivalent to Russian propaganda. Overplaying fears about the recklessness of Trump’s Taiwan call would certainly look to play into Chinese propaganda about the importance of not engaging Taiwan, yet it doesn’t mean such fears are a part of a propaganda network. That would be preposterous. China’s China Daily insisted there was “no need to over-interpret” the Trump call, writing it off, like other state-run outlets in China, as a product of the Trump team’s “inexperience.” China also called the move “petty” on Taiwan’s part, and reached out to Henry Kissinger to tell him they hoped for “stability.”

As Foreign Policy notes, the phone call was not an unprecedented breach of protocol in U.S.-China relations—in 1980 and 1981 the incoming Reagan administration sought to renormalize relations with Taiwan, inviting senior officials to various inauguration events. When the Chinese government suggested the U.S. revisit the Taiwan Relations Act, which governs U.S. relations with Taiwan, Reagan told his envoy the act should be even tougher. “Beijing stopped pushing and the Reagan administration enjoyed a far more productive and stable U.S.-PRC relationship than his predecessors, while simultaneously deepening trust with Taiwan,” Foreign Policy‘s Michael Green wrote, acknowledging that the Trump administration would find it “difficult to sustain this first move when there are so many other thorny issues they will have to work with Beijing.”

For his part, Trump took to Twitter to defend his call, insisting the Taiwan president had called him, and pointing out that it was “interesting how the U.S. sells Taiwan billions of dollars of military equipment but I should not accept a congratulatory call.” International relations professor Dan Drezner suggested on Twitter that the phone call was more important than “some guns” because it was an action that threatened “the core of the PRC’s self-conception of its sovereignty.” The U.S. has completed dozens of arms deals with Taiwan since the 1979.

China’s response to the call was described as “measured,” but while Trump team officials tried to downplay the significance of the phone call, Trump returned to Twitter to bring up other issues with China, complaining that the country did not ask for permission to “manipulate” its currency or militarize the South China Sea. Neither, though, did the U.S. ask China for permission to engage in the “Asia pivot,” which Obama announced in Australia in 2011 and which sought to increase the U.S. military presence and American influence in the regions around China. For some reason, four years later, the Obama administration was still confused why the Chinese government had begun to take a more confrontational stance vis a vis the United States. It’s a basic lack of understanding that undercuts the idea that the State Department officials and other foreign policy advisors necessarily have some kind of enlightened understanding of the messy business of international relations.

U.S.-China relations are bound to change to some degree under any new administration. In his election victory speech, Trump claimed under his administration the U.S. would “get along with all other nations willing to get along with us.” Some normalization of U.S.-Taiwan relations could possibly be something China supports in exchange for some U.S. demilitarization in the region. It’s also possible, though highly unlikely, for U.S.-China talks to produce an arrangement where the U.S. can have friendlier relations and less military obligations in the region. Trump sometimes talked about the U.S. no longer being the policeman of the world on the campaign trail. Given the anti-trade rhetoric toward China, it’s hard to see that thinking taking hold in East Asia (or the rest of the world). That’s unfortunate, because freer trade and less military entanglements in East Asia (and the rest of the world) would be good for peace and good for the U.S. economy, which Trump says he wants, as well as for the global economy. But until Trump takes office and goes in another direction, the possibility still exists.

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“The Curve Is Screaming Producer Hedging” – Shale Companies Scramble To Lock In Oil Prices

Less than two months ago, after the Algiers meeting but before the Vienna OPEC summit when speculation was rife that the cartel would be unable to reach a deal to cut production, we reported that “US Oil Producers Are Hedging At Levels Not Seen Since 2007” in which we wrote that “while OPEC has been busy desperately jawboning oil higher, US producers have been worried about oil’s reacquaintance with gravity. As a result, as the EIA reports, the amount of WTI short positions held be producers and merchants is just shy of a decade high.”

So now that the OPEC deal is done, if only on paper with formal implementation and compliance checks still up in the air until February 2017 at the earliest, have producers changed their tune?

One look at the changes to the oil strip (shown below) reveals that the answer is no, and as Bloomberg reports, “U.S. shale oil companies are using the post-OPEC rally to hedge their oil price risk for next year and 2018 above $50 a barrel, bankers, merchants and brokers said, pushing the forward oil curve upside down.” 

This rush to hedge could lead to a materialization of the biggest risk – and threat – to the OPEC deal: much higher U.S. oil production in 2017, offsetting the first OPEC production output cut in eight years. As such, the producer group could end throwing a life-line to a sector it once tried to crush.

Confirming that while speculators, many of whom have been squeezed as a result of a recent surge in short bets, have thrown in the towel on lower prices for the time being, producers are once again skeptical that the higher prices will prove sustainable: “Right after OPEC, U.S. producers were very active hedging,” said Ben Freeman, founder of HudsonField LLC, a boutique oil merchant with offices in New York and Houston. “We are going to see a significant amount of producer hedging at this levels.”

The hedging pressure triggered violent movements across the price curve. As shale firms sold oil for delivery next year and early 2018 the curve has notably flattened, leading to the first backwardation since 2014 as we observed last week.  Sure enough, as Bloomberg highlights today “WTI for delivery in December 2017 is now more expensive than in June 2018- a condition known as backwardation. A week ago, the forward curve was in the opposite shape, known as contango.”

“The curve is screaming producer hedging,” said Adam Ritchie, founder of consultant AR Oil Consulting and a former trading executive at Caltex Australia Ltd. and Royal Dutch Shell Plc.

Another take came from Harry Tchilinguirian, head of commodity strategy at BNP, who said that“The longer dated flattening in the futures curve does indeed reflect to a large extent increased producers activity, hedging on the back of the pop up in spot prices that followed the announcement of an output cut by OPEC.”

In the past year we have shown on various occasions that $50 seems to be the psychological level above which shale producers come out in droves to hedge future price increases. This time is no different:

The latest surge in prices extends U.S. shale drillers’ pattern of adding hedges when crude rises into the mid-$50s. Pioneer Natural Resources Inc., for example, said in early November that it increased its hedges for next year to 75 percent of production from 50 percent. In the third quarter, Devon Energy Corp. more than quadrupled its 2017 positions from the prior three months.

While the public won’t know for certain what current hedge positions are – U.S. shale companies and independent E&P companies usually reveal their level of hedging with a quarter delay – Bloomberg notes that anecdotal pricing activity already suggests their presence in the market. U.S.-based oil bankers and brokers also said they handled significant volumes after OPEC agreed to cut production. As it further adds, a record 580,000 crude options contracts traded on the New York Mercantile Exchange that day, while the number of puts hit the highest since 2012.

As the oil curve flipped, inter-month spreads, which move about 5 to 10 cents a day in normal times, swung eight times as much. The spread between December 2017 and December 2018 — a popular trade known in the industry as “Dec-Red-Dec” — jumped from minus $1.35 a barrel early on Wednesday before OPEC announced the deal, to plus 49 cents on Friday.

Finally, as noted above, a key factor pressuring forwards oil prices is doubt about whether OPEC and Russia will continue to curb supply when the deal ends in six months.

“Two things might be priced in this change — the first one is
that shale producers are hedging and the second one is that the deal is
for six months and then no one knows what’s going to happen,” said
Tamas Varga, analyst at brokerage PVM Oil Associates Ltd.

So while the OPEC deal continues to flush out the weak spec shorts, who continue to cover into this major oil rally, which has jumped 12% since last week and the biggest weekly gain in six years – US shale producers are once again far more skeptical about future price gains, and are not only hedging at a torrid pace, but telegraph that the rally has peaked. After all, who better know the all-in breakeven costs of oil production than the producers themselves.

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Fed Labor Market Conditions Index Contracts For 5th Straight Month

Despite a small rise MoM, The Fed's own Labor Market Conditions Index has now deteriorated year-over-year for 5 straight months, despite significant upward revisions over the last 6 months, most notably in September and October.

It seems a Trump win managed to improve the last six months of data…

 

While the index itself is at 8-month highs, this is still the 5th straight month of contraction year-over-year in LMCI…

 

As we noted previously, that's only the eighth time in nearly 40 years the index was down on a year-over-year basis, Deutsche Bank Chief U.S. Economist Joseph LaVorgna wrote in a note to clients today. Of the seven previous occasions, LaVorgna wrote, "four were soon followed by recession."

(In the three other cases, two were false alarms, in 1986-87 and 1995-96, and in 1981 the recession began shortly before the annual change in the LMCI turned negative.)

 

LaVorgna said the weakness in the LMCI indicates a rising possibility of recession.

 

"The upshot is that the economic outlook remains fragile despite the ostensible robustness of the labor market," he wrote.

But then again, everything is different and dreamy in the post-Trump world.

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Is the Bank of Japan TRYING to Crash the Markets?

Is the Bank of Japan is trying to crash the markets?

This is not conspiracy theory. In the last month the BoJ has devalued the Yen 14% against the $USD.

gpc12516

By any other measure this is a crash as far as currencies go. And it could lead to MAJOR issues for the financial system.

The last time the BoJ collapsed the Yen this aggressively the ENTIRE commodity markets imploded collapsing over 40%. Oil ended up collapsing from $60 to sub $48 in a matter of weeks.

gpc125162

Eventually this mess spilled over into stocks with China being forced to devalue the Yuan and the S&P 500 Crashing 10% in a few days as a result.

gpc125163

Here's the Yen/$USD pair today with the S&P 500 (blue line)… this could get VERY ugly VERY fast.

gpc125164

 Another Crisis is brewing… the time to prepare is now.

If you've yet to take action to prepare for this, we offer a FREE investment report called the Prepare and Profit From the Next Financial Crisis that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.

We made 1,000 copies available for FREE the general public.

As we write this, there are less than 50 left.

To pick up yours, swing by….

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

 

 

 

 

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Gold Double-Slammed As ‘Traders’ Puke $3.5 Billion Notional Through Futures Markets

The Italian referendum’s “no” vote sparked the rational reach for safe-havens as the Euro-endgame became more questionable… but that lasted less than an hour and since the $1190 highs overnight, gold has been monkeyhammered to 10-month lows amid two legs lower (EU open and US open) with spikes in volume of around $3.5 billion notional…

 

 

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Inauguration Day Is Still A Long Way Off

Submitted by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces (Airborne)) via SHTFPlan.com,

Many things have been happening in this “transition period” that point to one grim fact: Trump hasn’t sworn into office as president yet.  As a matter of fact, things are happening that may very well derail that inauguration.  There’s an old Irish expression: “There’s many a slip ‘twixt the cup and the lip,” and there’s quite a few slippery deeds in the works in particular that bear mentioning.  January 20, 2017 is still a long way off, and Obama isn’t done just yet.

From an international perspective, something very heinous happened in the dead of night just a little more than a week ago.  The House of Representatives passed a resolution, H.R. 5732, in a special session that included the suspension of normal rules.  Suspensions are characteristically used for bills that are not controversial.  H.R. 5732 is as controversial as they come: it holds the Caesar Syria Civilian Protection Act of 2016, with Sec. 303 holding the provision for the establishment of a no-fly zone over Syria.

The H.R. was introduced by Eliot Engel of New York (how surprising), and not only does the no-fly zone apply to Syrian planes in their own airspace, but also raises the prospect of engagements between U.S. and Russian aircraft.  Trump’s “reset” with Russia doesn’t occur until January 20, and there’s still a lot of time in between now and then.

Also, Jill Stein is challenging the election results in Wisconsin, Michigan, and Pennsylvania.  Isn’t it a coincidence that the three states are “swing” states that could (if reversed) help to affect a reversal of the whole thing?  Isn’t it also a coincidence that Hillary Clinton is “for” a recount and lauds Stein’s efforts?  It’s anybody’s guess how much the Clinton machine paid Stein to launch her crusade.

Meanwhile there exists the distinct possibility that many of the electoral college “electors” may reverse their votes for the deadline date of December 19 when they must declare and tally their choices.  The mainstream media is, of course protecting Obama as they reported that Obama said the election was indicative of the choice of the American people.  The media was also quick to point out that it was Obama who advised Clinton to concede defeat.

So, Obama is insulated from all that may happen in the next few weeks, and it’s obvious he can strike a pose of indignation when he “finds out” that the challenge has a “basis in fact.”  Right now, Clinton and Stein are creating their case.  They are also relying heavily on reports from many different areas that the Russians were involved in changing the vote.  Yes, that Frankenstein monster has been charged with electricity, and the “Russian hacking” is surfacing to be used as a tool in this challenge to the vote.

In addition, Zero Hedge recently posted an article written by Tyler Durden that bears reading.  The mainstream media and their flunkies, in this case an organization named PropOrNot, the director of which gave an interview to the Washington [Com]Post (on conditions of anonymity, naturally) stating that alternative media sites have been running news articles that are Russian propaganda.  All this, of course, with the intention of skewing the vote.

Just about two weeks ago, Obama met with Merkel of Germany to discuss the effects of the Internet in creating dissent.  Both of those two (the community organizer and the former East German Communist Party groupie-girl) stated the need for governments to be able to control what is released on the Internet.  In a follow-up to this, China has called upon governments involved in ICANN (Internet Corporation for Assigned Names and Numbers) to clamp down on independent journalists and websites.  The transfer of U.S. administration of the Internet to this foreign conglomerate (ICANN) took place without much fanfare on October 1, 2016.

These are harbingers of things to come.  There will be eventual control and interference of independent news media sites under the guise of “oversight” and the “protect the public” cover statements.  In addition to this, the alternative media will be blamed for “complicity” in the fraudulent claim of Russian interference in the U.S. election.

The Marxists such as Stein, and Hillary (with Soros, Podesta, and the rest of the Shadow Party) will try to reverse the election results while simultaneously demonizing the alternative media with false charges to justify their future controls over it.

So domestically, we’re seeing a challenge to the election results, the demonization of the alternative media, and claims of Russian hacking and interference while the House of Representatives quietly passed a resolution that could very well start World War III.  The transition period, right?  Perhaps a transition into a world war with Obama never leaving.  Or perhaps the transition period is only half-right.  Obama may leave, but it may be Clinton to step in instead of Trump.

Never underestimate a Marxist with a billion dollars and an army of oligarchs to lean on, and January 20 is a long way off.

via http://ift.tt/2h6tMjC Tyler Durden