Month: February 2018

“The Vol Market Finally Broke”: A Quant Explains What Happened Today, And What Is Coming Tomorrow

By Charlie McElligott, managing director of cross-asset strategy at Nomura.

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The “grey swan” we all have spoken about for years—that being the absurd “tail wagging the dog” potential of VIX ETN market structure (inverse and leveraged products) AND the massive growth in “negative convexity” / “vol target” / “vol rebalancing” strategies to either generate extra income or “systematically allocate risk” (looks good in the prospectus, right?!) –finally “broke” the volatility market, and has now bled-through to the “underlying” spot equities market…as the short vol trade went “lights out.” 

The ETNs are the “patient zero” of this current market meltdown.  It is estimated that there was anywhere from ~$125mm to $200mm of vega / VIX futs to BUY on the close from the two main “short VIX” ETNs that rebalance daily (XIV and SVXY).  As S&P traded -50 handles AFTER the cash close from 4:00pm to 4:15pm into the market’s anticipation of the massive rebalancing of volatility (buy to cover) on the close, XIV then saw a delayed and terrifying ~-87 PERCENT move after the close, as some who owned XIV puts as crash protection sniffed this potential and speculated liquidation from the ETN, which is set per a rules-based system to buy back short vega after an 80% “crash trigger”(which again isn’t a certainty because they use a blend of 1st and 2nd month).  The asset pool nonetheless was seemingly / largely wiped-out and the note is guaranteed to “pay out” to their shareholders as set per their prospectus.  It is likely that this thing has indeed been “triggered” and will be forced to liquidate.  SVXY doesn’t have the firm 80% “trigger” but too is seeing its NAV “wiped out” and is trading ~-80% post-close as well.

The issue NOW is the pile-on going-forward across assets, as the systematic “short vol” community’s models are now completely toast, and they too will be forced to cover remaining “short vol” positions that didn’t trade today—i.e. BE PREPARED FOR A MAJOR VIX FOLLOW-THROUGH TOMORROW. 

VaR-based models need to be reset across all asset-class strategies, forcing further de-risking over the coming days and potentially weeks, as heads of funds and heads of risk try to figure out how much their models are forcing them to “gross-down.”  Shorter-term vol target / vol allocation strategies (think CTAs) and longer-term models like risk-parity and too will reset and “rebalance” their risk (lower) as realized vols are re-priced.  Structured products, annuities and other vehicles with built-in protection?  Also purging exposure on the vol reset.  Finally, it also shouldn’t be lost on the popularity of “short VIX” trades in the retail community, and the “butterfly flapping its wings” relationship to the recent melt-down in the crypto-currency space. 

The “white knight” of corporate buybacks (which by the way were running at 300% of volume today per a competitor as they were pumping the mandates to hold-up their stocks) will be extraordinarily tested with keeping the stock-market “propped up,” especially as the traditional active community is likely to back-away until there is a better sense on how this event shakes out… few will willingly be in there tomorrow prepared to catch this falling knife.

Cross-asset, the trickle-down of unwinds is clearly a focal point from here.  As noted two weeks back in the “Nomura Cross-Asset” piece, I’ve been focusing on the “risk” of positioning asymmetries with consensual “bearish rates” / “flattener” and “short USD” trades primarily, but too, crowded thematic equities position tied to the rates and USD trades (i.e. “long momentum” / “long tech / growth”).  

As such, the +7 Z-SCORE (relative to 90d move) today in the UST 2Y/ mongo bull-steepening seen in 5s30s (+7bps today, +17bps since Thursday) raises a “pain trade” red flag.  Single-stock equities clearly took a hit on the back of the index moves, as thematic trades like “long US high beta”–which was +8.1% YTD on Jan 26th—are now -1.5% YTD after trading down -7.1% the past two sessions alone.  The six-day move in US momentum longs has been -4 standard deviations (across all returns dating back to April ’13), only previously experienced during the “Flash Crash.” 

My model equity L/S portfolio experienced its worst day since the early Feb ’16 market-neutral unwind which occurred during the “great deflation scare.”  Net / net, it wasn’t pretty out there.

Buckle-up, because this move isn’t over yet.

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Asian Stocks Are A Sea Of Red, US Futures Enter Correction -10% From Highs

Playing catch-up, or worse, appears to be the opening scenario for Asian equities which are down from around 2% (Malaysia) to 5% (Japan) but perhaps more importantly, Treasury yields continue to tumble.

US Equity futures are continuing to tumble in overnight trading – all entering the 10% technical correction…

 

On the bright side, Japanese stocks are not down as much as Nikkei futures were in the US session…

But the loss of faith in Fed rate hikes continues as 2Y yields tumble back below 2.00%…

 

Asian FX is also extending its drop against the dollar…

And while the dollar is stronger, gold is also bid…

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Ron Paul Explains What The FBI/FISA Memo Really Tells Us About Our Government

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

The release of the House Intelligence Committee’s memo on the FBI’s abuse of the FISA process set off a partisan firestorm.

 

The Democrats warned us beforehand that declassifying the memo would be the end the world as we know it. It was reckless to allow Americans to see this classified material, they said. Agents in the field could be harmed, sources and methods would be compromised, they claimed.

Republicans who had seen the memo claimed that it was far worse than Watergate. They said that mass firings would begin immediately after it became public. They said that the criminality of US government agencies exposed by the memo would shock Americans.

Then it was released and the world did not end. FBI agents have thus far not been fired. Seeing “classified” material did not terrify us, but rather it demonstrated clearly that information is kept from us by claiming it is “classified.”

In the end, both sides got it wrong. Here’s what the memo really shows us:

First, the memo demonstrates that there is a “deep state” that does not want things like elections to threaten its existence. Candidate Trump’s repeated promises to get along with Russia and to re-assess NATO so many years after the end of the Cold War were threatening to a Washington that depends on creating enemies to sustain the fear needed to justify a trillion dollar yearly military budget.

Imagine if candidate Trump had kept his campaign promises when he became President. Without the “Russia threat” and without the “China threat” and without the need to dump billions into NATO, we might actually have reaped a “peace dividend” more than a quarter century after the end of the Cold War. That would have starved the war-promoting military-industrial complex and its network of pro-war “think tanks” that populate the Washington Beltway area.

Second, the memo shows us that neither Republicans nor Democrats really care that much about surveillance abuse when average Americans are the victims. It is clear that the FISA abuse detailed in the memo was well known to Republicans like House Intelligence Committee Chairman Devin Nunes before the memo was actually released. It was likely also well known by Democrats in the House. But both parties suppressed this evidence of FBI abuse of the FISA process until after the FISA Amendments Act could be re-authorized. They didn’t want Americans to know how corrupt the surveillance system really is and how the US has become far too much like East Germany. That might cause more Americans to call up their Representatives and demand that the FISA mass surveillance amendment be allowed to sunset.

Ironically, Chairman Nunes was the biggest cheerleader for the extension of the FISA Amendments even as he knew how terribly the FISA process had been abused!

Finally, hawks on both sides of the aisle in Congress used “Russia-gate” as an excuse to build animosity toward Russia among average Americans. They knew from the classified information that there was no basis for their claims that the Trump Administration was put into office with Moscow’s assistance, but they played along because it served their real goal of keeping the US on war footing and keeping the gravy train rolling.

But don’t worry: the neocons in both parties will soon find another excuse to keep us terrified and ready to flush away a trillion dollars a year on military spending and continue our arguments and new “Cold War” with Russia.

In the meantime, be skeptical of both parties. With few exceptions they are not protecting liberty but promoting its opposite.

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Credit Suisse Tumbles On Fears Of Massive XIV Loss

In addition to being the creator of the now infamous XIV ETN  – which was reportedly the most popular way of shorting volatility for retail investors, all of whom now face almost certainly total losses – Credit Suisse also happened to be its biggest holder. 

Which, now that the ETN appears fated for termination, is suddenly a very big problem for Credit Suisse since according to the latest public filings, the Swiss bank owned 4.79 million units, or over $550 million, worth of XIV at yesterday’s close of $115.55, and roughly $480 million less at today’s after hours closing tick of $15.43. Of course, if the ETN is redeemed – and with its NAV at $4.22 according to the VelocityShare website – the loss could be total.

And while the question remains who exactly is eating the losses at Credit Suisse – the bank or its clients – the market is not taking chances, and Credit Suisse ADRs have tumbled in Asian trading…

… because if Credit Suisse is on the hook, it would mean two quarters of profits have just been wiped out: recall that CS reported roughly $250MM and $300 million in profits in the last two quarters, which would mean that the XIV loss was roughly equivalent to half a year’s worth or profits, an outcome which the regulators will be very interested in, not to mention shareholders, clients, and their lawyers.

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Grassley: “2nd Dossier” Fed To Christopher Steele By Obama State Dept, Routed Through Clinton Crony

A heavily redacted document just released by the Senate Judiciary Committee confirms the existence of a second anti-Trump dossier which – much like the first dossier published by Buzzfeed – relied on information from Russia’s FSB, the state security service. Said otherwise, actual Russian collusion in an attempt to sway the 2016 election.

Shockingly, this second dossier went from Clinton “hatchet man” Cody Shearer, who gave it to an unnamed official in the Obama State Department, before it was routed it to former British Spy Christopher Steele. It is unknown what happened to the document after that. 

According to the referral, Steele wrote the additional memo based on anti-Trump information that originated with a foreign source. In a convoluted scheme outlined in the referral, the foreign source gave the information to an unnamed associate of Hillary and Bill Clinton, who then gave the information to an unnamed official in the Obama State Department, who then gave the information to Steele. Steele wrote a report based on the information, but the redacted version of the referral does not say what Steele did with the report after that.

Published accounts in the Guardian and the Washington Post have indicated that Clinton associate Cody Shearer was in contact with Steele about anti-Trump research, and Obama State Department official Jonathan Winer was a connection between Steele and the State Department during the 2016 campaign. –Washington Examiner

Of note, Shearer’s brother served as an ambassador during the Clinton administration, and his late sister was married to Strobe Talbott, the chief authority on Russia in President Bill Clinton’s State Department, according to ProPublica.

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Cody Shearer (Youtube screen grab)

The newly released Senate Intel Committee document, authored by Senators Chuck Grassley (R-IA) and Lindsey Graham (R-SC) is an unclassified version of a Jan 4 criminal referral to the Justice Department targeting Christopher Steele – the former British spy who assembled the Trump-Russia dossier used to obtain a FISA surveillance warrant on one-time Trump advisor Carter Page.

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Christopher Steele

Grassley and Graham also claim to have “substantial evidence” that Steele misled the FBI about his contacts with journalists regarding the dossier. In British court filings, Steele disclosed that he held off-the-record meetings with reporters at various news outlets prior to the 2016 election. 

“There is substantial evidence suggesting that Mr. Steele materially misled the FBI about a key aspect of his dossier efforts, one which bears on his credibility,” reads the unredacted document. 

Grassley and Graham’s letter also blasts the FBI for blocking key details of their memo calling for Steele’s investigation, and gives them until tomorrow to provide an unredacted copy.

The second memo’s existence was revealed last week by The Guardian, which named the source as Clinton “hatchet man” Cody Shearer – a former journalist and political activist for the Clinton White House in the 1990s. 

Shearer’s name recently appeared in a January 25 letter from the Senate Judiciary Committee to six individuals or entities thought to be involved in the funding, creation or distribution of the original salacious and unverified “Trump-Russia Dossier.” Recipients of the letter – including John Podesta, Hillary Clinton and Debbie Wasserman Schultz – are asked to submit all communications between a list of 40 individuals or entities, one of whom is Cody Shearer. 

Furthermore, during the Benghazi investigation of Hillary Clinton in 2015, the National Review called Shearer “someone with a history of misleading foreign sources, misrepresenting himself as an agent of the US government, and creating trouble for both himself and the United States abroad.” NR cited the story about Shearer’s secret trip to Bosnia in the 1990s, where he extorted money from the Bosnian Serbs, claiming he was a secret envoy of the Clinton administration and could negotiate a reduction of war crimes charges.

Like the original dossier, the Guardian adds that Shearer shared his dossier “with select media organizations before the election,” without naming the outlets. The Daily Caller’s Chuck Ross cites a passage from a recent book by the Guardian’s former correspondent in Moscow, Luke Harding, about how he received an email from the “Clinton camp” that contained the same accusations as in the Steele dossier, but was not Steele’s work.

All eyes on the Obama State Department

Last week, House Judiciary Committee Chairman Devin Nunes said that the panel is now setting it’s sights on the Obama Administration as “phase two” of their investigation. 

“We are in the middle of what I call phase two of our investigation, which involves other departments, specifically the State Department and some of the involvement that they had in this,” said Nunes. 

“That investigation is ongoing and we continue work towards finding answers and asking the right questions to try to get to the bottom of what exactly the State Department was up to in terms of this Russia investigation.”

3rd Dossier?

Last week we reported on the release of 42 pages of heavily redacted State Department documents obtained by Judicial Watch through the Freedom of Information Act (FOIA) – which reveals that the Obama State Department provided Senator Ben Cardin (D-MD) a “dossier of classified information on Russia” in order to undermine President Trump, according to Judicial Watch President Tom Fitton.

“These documents show the Obama State Department under John Kerry gathered and sent its own dossier of classified information on Russia to Senator Ben Cardin, a political ally in the U.S. Senate, to undermine President Trump,” said Judicial Watch President Tom Fitton. “Judicial Watch will pursue information on who pulled this classified information, who authorized its release, and why was it evidently dumped just days before President Trump’s inauguration.”

According to a March 2017 report in the Baltimore Sun: “Maryland Sen. Ben Cardin received classified information about Russia’s involvement in elections when the Obama administration was attempting to disseminate that material widely across the government in order to aid in future investigations, according to a report Wednesday … Obama officials were concerned, according to the report [in The New York Times], that the Trump administration would cover up intelligence once power changed hands.” –Judicial Watch

As Fitton explains, there are three dossiers, two of which were routed through the Obama State Department.

As we have reported, in March 2017, Former Obama Deputy Assistant Secretary of Defense, Evelyn Farkas, made some stunning admissions during an interview with MSNBC’s Mika Brzezinski.

While discussing the mad scramble by the Obama administration to collect and preserve intelligence on alleged Russian election hacking before Obama left office, it appears that Farkas accidentally implicated the Obama White House in the surveillance of Trump’s campaign staff:

The Trump folks, if they found out how we knew what we knew about the Trump staff dealing with Russians, that they would try to compromise those sources and methods, meaning we would not longer have access to that intelligence. –Evelyn Farkas

Those “sources and methods” now appear to be Clinton operatives using Russian FSB “sources” to create several dossiers, which were circulated to media outlets and US government officials with the assistance of the Obama State Department. In other words, in a delightful twist of irony, the real Russian collusion was against a now-sitting President.

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Vol ETF Terminations Begin: Nomura Announces Early Redemption Of VIX ETN

While we await news on whether Credit Suisse will (or won’t) terminate the retail-favorite XIV ETN, following its historic, 90% collapse, some other ETF/ETN providers are starting to terminate their VIX-linked offerings.

Moments ago, Nomura Europe Finance said the Next Notes S&P500 VIX Short-Term Futures Inverse Daily Excess Return Index ETN will be redeemed early, after a condition for early redemption was triggered due to movements in the underlying index. The underlying index on the ETN is the S&P500 VIX Short-Term Futures Inverse Daily Excess Return Index

The ETN in question, 2049.JT has not yet open, and based on this announcement, it looks like it won’t.

This is the full announcement concerning the VIX-linked ETF, google translated:

Announcement concerning the determination of early redemption of foreign index-linked securities “2049 NEXT NOTES S & P 500 VIX Inverse ETN” which is the listed ETN listed trust beneficiary certificate (hereinafter referred to as “ET “S & P 500 VIX Short-term Futures Inverse Daily Index Coordinated Bond” (hereinafter referred to as “ETN”), which is a foreign asset-backed securities, which is a trust property of N / JDR, is subject to an early redemption clause. We will inform you that it will be redeemed early.

1) Applicable to early redemption clause (Including the closing price) in the US market of the “S & P 500 VIX Short-Term Futures Inverse Daily Index” (hereinafter referred to as “the index”), which is the subject index of the ETN, is closing the closing price of the relevant index value % Or less, the ETN will be redeemed early on the day after 10 business days of the day (“early termination date”) that it realized. On February 5 the relevant index value is closing, the closing price of the relevant index on February 2 It fell to 268,517.46 or less, which is equivalent to 20% of 1,342,587.30, so it will be redeemed at an early date.

2) Early redemption amount Based on the amount equivalent to the value of the ETN as of the early termination date calculated by the calculation agent in its sole discretion in accordance with the following formula for the face value of 10,000 yen of the ETN in a commercially reasonable manner by such redemption (Excluding, but not limited to) the expenses related to the cancellation of related hedge transactions that the Company has borne. 10,000 yen × (redemption price / 100)

Provided, however, that the redemption amount received by the holder as of the ETN JDR trust finish date shall be equal to the payment fee from the early redemption amount to the trustee of said ETN J DR and the equivalent amount of withholding tax, It is deducted from trust fee. We will disclose details of the ETN JDR and details of the handling of said ETN in the future as soon as it is confirmed. We sincerely apologize for the inconvenience caused to our holders.

And the full, original announcement:

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Game Over? Newsweek Fires Top Editors, Staffers Told To Go Home

Employees at Newsweek were informed today that editor-in-chief Bob Roe and executive editor Ken Li have been fired, along with journalist Celeste Katz – who had written articles covering an active investigation into parent company Newsweek Media Group, sources tell CNN.

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Staff in Newsweek’s New York offices were told they could stop working and go home for the day on Monday afternoon, the source close to the newsroom told CNN.

“Can confirm I was fired. I know nothing else. Can say nothing else yet,” Roe told CNN in an email.

It is unclear whether the firings are related to Katz’s ongoing coverage of the Manhattan DA’s ongoing financial investigation of Newsweek, whose New York offices were raided January 18. Katz reported that authorities were investigating a potential “money trail” between former Newsweek Media Group executives and Olivet University, a California Christian College.

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Investigators from the Manhattan DA’s office remove servers from Newsweek (source: Newsweek)

A search of Olivet’s publicly available tax records shows that in 2014, IBT Media Inc., later renamed Newsweek Media Group, paid the school $1.63 million for a R&D agreement. The company is listed as a “former trustee.” In 2013, Olivet’s tax filing listed another similar payment from the media organization to the school: $1.26 million for a licensing agreement.

Agents seized 18 computer servers as part of a criminal probe into the company’s finances, which sources said had been underway for at least 17 months at the time authorities executed a search warrant. –Celeste Katz, Newsweek

Also of note that Newsweek placed Chief Content Officer Dayan Chandappa on leave following allegations that he sexually harassed women while he was a top Reuters official, which fired journalist Celeste Katz wrote about last week. 

The chief content officer of Newsweek Media Group, which publishes Newsweek and a suite of other digital properties, is taking an immediate leave of absence Monday following a news report that he had been dismissed from his previous job after a subordinate filed a sexual harassment complaint against him, the company announced Monday. –Celeste Katz, Newsweek

Aaaaaand, she’s gone – along with two top Newsweek editors who ostensibly green lighted the articles.  

Police visited the Newsweek offices in December to investigate a white substance had been mailed to now-fired Executive News Director Ken Li, which they were then told turned out to be a false alarm.

The firings are the latest in a series of major issues for the beleaguered publication. As we reported last week, Newsweek’s parent company was busted by an independent ad fraud researcher for defrauding the Consumer Financial Protection Bureau by selling the agency online advertising which included a signficant amount of “cheap junk traffic with a share of bots.“

When it comes to IBT’s fraudulent traffic practices, Social Puncher’s findings align with reporting from BuzzFeed News on IBT India, and with separate data gathered by Pixalate, an ad fraud detection company, and DoubleVerify, a digital media measurement company. (Social Puncher and BuzzFeed News previously collaborated on ad fraud investigations, but worked separately in this case.)

Based on what it described as a detailed investigation, DoubleVerify this week classified IBT’s US, UK, India, and Singapore sites as “as having fraud or sophisticated invalid traffic,” according COO Matt McLaughlin. DoubleVerify is now blocking all ad impressions on these sites on behalf of customers.

In response to questions from BuzzFeed News, Newsweek Media Group, the parent company of IBT, acknowledged it purchases audiences from ad networks that sell pop-up and pop-under traffic. It said this traffic represents a “small percentage of traffic on our sites” and denied any fraudulent activity. –Buzzfeed

The CFPB, now headed by Trump appointee Mick Mulvaney, told BuzzFeed News that the bureau is looking into the allegations. 

While defrauding the CFPB would seem to be a federal case – the Manhattan DA would also have jurisdiction for any fraud which has occurred within the state. 

So – the moral of the story for aspiring journalists appears to be that if your parent company is under active investigation, and your chief content officer has taken a leave of absence for sexual harassment, you may be fired if you report on it.

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The Fed’s Dependence On Stability

Authored by Lance Roberts via RealInvestmentAdvice.com,

Last week, I discussed how the Federal Reserve will likely be the culprits of whatever sparks the next major financial crisis. To wit:

“In the U.S., the Federal Reserve has been the catalyst behind every preceding financial event since they became ‘active,’ monetarily policy-wise, in the late 70’s. As shown in the chart below, when the Fed has lifted the short-term lending rates to a level higher than the 10-year rate, bad ‘stuff’ has historically followed.”

This past week, as Ms. Yellen relinquished her control over the Federal Reserve to Jerome Powell, the Fed stood by its position they intend to hike rates 3-more times in 2018.

With the entirety of the financial ecosystem now more heavily levered than ever, due to the Fed’s profligate measures of suppressing interest rates and flooding the system with excessive levels of liquidity, the “instability of stability” is now the biggest risk.

The “stability/instability paradox” assumes that all players are rational and such rationality implies avoidance of complete destruction. In other words, all players will act rationally and no one will push “the big red button.”

The Fed is highly dependent on this assumption. After more than 9-years of the most unprecedented monetary policy program in human history, they are now trying to extricate themselves from it. The Fed is dependent on “everyone acting rationally,” particularly as they try to reduce their balance sheet. The first attempt was seen in January.

Well…sort of…but not really.

While the Fed did “reduce” their holding by $28 billion in January, it followed an increase of $21 billion in December. Which brings up several questions?

  1. Was the ramp up/run down just a test of the market’s stability?  (Seems likely.)
  2. With the market throwing a “conniption fit” last week, will the Fed rethink their balance sheet reduction program? (Probably)
  3. More importantly, with the government on the verge of another “shut down” this coming week due to the expiration of the “continuing resolution” from three weeks ago, will the Fed continue its current path in the face of an event that could lead to fiscal instability?  (Probably not)

We will soon find out.

The chart below shows the cumulative weekly changes to the Fed’s balance sheet versus bond issuances by the Treasury to fill the deficit requirements. You can see the big spikes in issuances following repeated “debt ceiling” debates which were funded by “continuing resolutions.” 

Given the current tenuous political environment in Washington, D.C., not to mention the poisonous  partisan divide between parties, there is a high probability next week could result in another potential “government shutdown” as funding is held up to extract political gain. Such could certainly roil the markets more.

In such an environment, if the Fed continues their $30 billion balance sheet reduction program, they are “assuming” that “rational players” will step in to “buy” bonds keeping rates from spiking too quickly. The Fed most certainly understands the risks of sharply rising rates and the impact on the economy, and a bond market dislocation is “the weapon of mass destruction” they certainly want to avoid being launched. 

I highly suspect we will see the Fed re-engage in their ongoing “reinvestment” cycle to stabilize markets until an impasse is reached by legislators in Washington.

But herein lies the risk.

The Fed is very likely walking into a trap of their own making.

With the recent spate of stronger economic data driven primarily by several natural disasters, the Fed is assuming that real, organic, economic growth is stronger than it is. While they point to macro-data points, like wages and employment, as a reason to lift interest rates to head off a potential overheating of the economy, the problem is when you break the data down to look at the real situation of the majority of Americans that drive the economy.

As I showed in this past weekends newsletter:

“Despite a rampant rise in the markets, the recent spate of economic growth has been due to massive natural disasters across the lower third of the U.S. The impetus from those rebuilding efforts are now running their course and we are already seeing a weakness in the numbers.

But wages are crushing it, and employment is booming?

Yes, wages are rising but only for the top 20% of workers.”

“And employment in the key demographic is not.”

Here is the problem for the Fed.

  • The Federal Reserve is hiking the short-end of the yield curve, which hits variable-rate borrowers,
  • At the same time, the longer-end is spiking higher, which reduces demand for borrowing for CapEx, investment and longer-dated loans, like mortgages, which is already seen in declining loan demand.
  • Add to this the reduction in liquidity support for the market, and you have all the ingredients for something to go horribly wrong.

As I said last week:

“But the risk to investors is NOT just a market decline of 40-50%.

While such a decline, in and of itself, would devastate the already underfunded 80% of the population that is currently woefully under-prepared for retirement, it would also unleash a host of related collapses throughout the economy as a rush to liquidate holdings accelerates.

All holdings.

The next bear market will not be like the last.

It will be worse because it will be spread across the entire financial ecosystem. Pensions, welfare, markets, debt, real estate and savings.”

But these are all assumptions that should not come to pass as long as “everyone remains rational.” 

Unfortunately, historically speaking, such has not been the market’s “strongest trait.”

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TradeStation Halts Daytrading Of Overnight Futures Trading Due To “Extreme Volatility”

While clients of Roboadvisors may have had a bad day today, when instead of being allowed to log into their online trading accounts they got 404 errors, the pain for clients of Trade Station is just starting, because according to an email blasted to the company’s “valued clients”, due to the “extreme volatility in the markets, day trading of ALL futures products has been suspended for the overnight session.”

The bad news did not stop there, however, and the notice told TS traders that those trading without initial margin in the most widely held futures contracts, “are subject to immediate liquidation.”

In other words, full margin will be required for contracts to be traded overnight.

Here is the full notice for what is setting up to be an extremely chaotic overnight session, one in which we expect one or more major trading firms to be wiped out, with the possibility of central bank intervention spiking.

 

 

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House Intel Committee Votes To Release Democratic Response To Nunes’ Memo

The House Intelligence Committee voted unanimously on Monday to approve the release of the Democratic minority rebuttal to the GOP authored memo alleging surveillance abuses by the FBI and DOJ during the 2016 campaign.

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Adam Schiff (D-CA) and Devin Nunes (R-CA)

“Republicans have endeavored to put the FBI on trial, put the Department of Justice on trial, impeach and impugn the hard work of these dedicated public servants at the FBI and the Department of Justice,” California Rep. Adam Schiff, the top Democrat on the panel, told reporters after Monday’s committee vote. “We think this very ill-serves the public and we hope that they will stop.”

The vote follows the Friday release of the “FISA memo” created by staffers from the office of House Intel Committee Chairman Devin Nunes (R-CA), which claims that the FBI and DOJ used the infamous “Trump-Russia” dossier in order to spy on one-time Trump campaign advisor Carter Page. 

The White House responded to the release by saying that the memo “raises serious concerns about the integrity of decisions made at the highest levels of the Department of Justice and the FBI to use the government’s most intrusive surveillance tools against American citizens.”

President Trump has five days to consider whether or not to block the release of the Democrat authored response over reasons of national security. White House Press Secretary Sarah Sanders suggested on Friday that President Trump would not oppose its release.

“The administration stands ready to work with Congress to accommodate oversight requests consistent with applicable standards, including the need to protect intelligence sources and methods,” said Sanders of the Democrat response. 

President Trump tweeted over the weekend that the GOP authored memo “totally vindicates” him in the Russia probe.

House Intel Committee Minority leader Adam Schiff (D-CA) disagreed:

The 10-page Democrat response is said to correct “mischaracterizations” contained within the Republican memo, adding “crucial context” to actions by the FBI and DOJ regarding the application for a FISA court order to wiretap Mr. Page in October, 2016.

Talking points circulated last week by top House Judiciary Committee Democrat Jerry Nadler (D-NY) call the GOP-authored memo “deeply misleading,” according to Bloomberg, and claims that Republicans are now “part and parcel to an organized effort to obstruct” Special Counsel Robert Mueller’s investigation into Russian interference in the 2016 election. 

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Maxine Waters (D-CA), Jerry Nadler (D-NY)

“Until now, we could only really accuse House Republicans of ignoring the President’s open attempts to block the Russia investigation,” Democratic members of the House Judiciary Committee said in the four-page letter released on Saturday. The document provided a point-by-point rebuttal to the Republican memo alleging bias in Mueller’s probe of possible links between Russia and Trump’s campaign, according to Bloomberg’s summary.

“With the release of the Nunes memo — a backhanded attempt to cast doubt on the origins of the Special Counsel’s investigation — we can only conclude that House Republicans are complicit in the effort to help the President avoid accountability for his actions and for the actions of his campaign,” reads the talking points.

The “Nunes memo,” as Democrats call it, claims that the FBI obtained a FISA warrant against one-time low-level Trump advisor, Carter Page.

“Carter Page was, more likely than not, an agent of a foreign power. The Department of Justice thought so. A federal judge agreed. The consensus, supported by the facts, forms the basis of the warrant issued,” Nadler writes in the rebuttal. 

***

As we wrote last week: 

According to the New York Times, the FBI investigation into Russian collusion began after drunken Trump campaign volunteer, George Papadopoulos, reportedly told Australian diplomat Alexander Downer at a London bar in May, 2016 that “Russia had political dirt on Hillary Clinton.” When DNC emails began to leak, Australia apparently contacted US intelligence to report the drunken admission by Papadopoulos – igniting the Russia probe.

WASHINGTON — During a night of heavy drinking at an upscale London bar in May 2016, George Papadopoulos, a young foreign policy adviser to the Trump campaign, made a startling revelation to Australia’s top diplomat in Britain: Russia had political dirt on Hillary Clinton.

About three weeks earlier, Mr. Papadopoulos had been told that Moscow had thousands of emails that would embarrass Mrs. Clinton, apparently stolen in an effort to try to damage her campaign.

Exactly how much Mr. Papadopoulos said that night at the Kensington Wine Rooms with the Australian, Alexander Downer, is unclear. But two months later, when leaked Democratic emails began appearing online, Australian officials passed the information about Mr. Papadopoulos to their American counterparts, according to four current and former American and foreign officials with direct knowledge of the Australians’ role. –NYT

This is in stark contrast to GOP leaders who say that the salacious and unverified 34-page opposition research dossier triggered the probe. 

For the New York Times – much like CNN’s botched “Bombshell” report from a few weeks ago that Donald Trump Jr. was told about the WikiLeaks emails before their release, only to issue a major correction because Trump Jr. was told after they were made public (by a random person), this “startling revelation” by the NYT that Papadopoulos spilled the beans about Russia having dirt on Clinton was already public information.

The Washington Examiner‘s Byron York tore into the NYT report:

With both the House and Senate now setting their sights on the State Department’s alleged involvement with distributing anti-Trump intelligence, and new memos on tap according to House Intel Committee Chair Devin Nunes (R-CA), it will be interesting to see how deep into “memogate” we will get before something resembling a second special counsel is appointed.

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