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Submitted by George Goncalves of MacroHive; Goerge is a twenty years fixed income markets veteran. Over that time he has covered rates, structured products and credit. He worked both on the buy-side and sell-side.

Fed’s Challenge To Administer Liquidity Into Year-End And Beyond

Even with hundreds of billions of dollars in new liquidity created out of thin air, it’s too soon for the Fed to signal a clear coast for repo markets. On the one hand, through heavy liquidity dosages the Fed has doused the fire; but on the other hand, we do not know if that dosage was too much or too little. The true test still lies in the weeks around year-end.

Fed Fears the Worst

The Fed has not idled in wait of potential new flare-ups. Since our last update on Fed policy dynamics, it has rolled out more repo operations and added 42-day calendar repos to help provide funding over the year-end turn. These operations have seen nearly double the amount of submissions versus the offering size of $25bn each. This demonstrates that primary dealers aren’t taking any chances either.

In addition to daily and term repo operations, the Fed has purchased over $100bn T-bills for its SOMA portfolio since October. These so-called ‘not QE’ asset purchases, along with the repo operations, have led to the Fed’s balance-sheet growing at a faster clip than that experienced in the first twelve weeks of QE2 and QE3 (Chart 1). Luckily it’s not QE though, right?

If that’s true, we come to our primary question: what comes next in 2020? But before we brainstorm that and the implications thereof, we should take stock of what has changed in the key Fed balance sheet categories.

The Balance Sheet Changes Since September

As of November’s last week, the Fed’s balance sheet has grown in size by nearly $300bn since the repo flare-up. This speed goes to prove a concept well known in the marketplace: the Fed tightens slowly and eases quickly. In less than three months the Fed unwound basically half of QT.

The Fed has imperfect control over its liabilities, so investors should never assume a one-for-one relationship exists between asset purchases and the expansion of excess reserves. For starters, currency in circulation has been on cruise control since the financial crisis (rising at ~6% a year). But it’s the non-reserve items, foreign central bank (FCB) reverse repos, and Treasury general account (TGA) that make it challenging to predict reserve trends.

As seen above (Chart 2), total reserves have increased. But the TGA grew much more in total (in fact, the first week post 9/11 was the week that led to the reserve shortfall/repo spike as TGA expanded). It’s as if most of the Fed repos since that period indirectly provided short-term cash to the Treasury as dealers are able to purchase more USTs and ‘temporarily’ fund them with the Fed.

Now, it’s not that simple and there is overlap with the T-bill purchases which are producing more permanent excess reserves. Nonetheless, the amount of Fed repos nearly matches the growth in TGA. If the Fed had not expanded, its balance sheet there would have been more reserve draining because UST issuance would have mopped up cash needed to restock the TGA. Meanwhile, FCBs have pulled some money from the Fed and are providing relief by reducing their F-RRP allocation.

The Hand-off From Repo to ‘Not QE’ Reserve Growth

The effective Fed funds rate is back under control as are repo rates for the most part. That said, there is the occasional drift up in rates and the year-end turn is trading hundreds of basis points above the Fed target. The rest of this month could still see further pressures build as dealers pull back balance sheet usage and shy away from Fed term repos. Dealers will also aim to run a tight ship and will likely operate one day at a time in December.

But here is the tricky part (and another example of falling into a false sense of security). Clearly with the Fed on notice and providing a laddered safety net of repo liquidity, this year-end should theoretically be better than last year. And once we turn the calendar into 2020, commercial banks should start to open up their balance sheets and so Fed’s repo should decline as well.

The 2020 Path

So back to our main concern: 2020. Assuming there isn’t something more nefarious going on in the banking system by some point in early next year, Fed repo assets should decline in size. That said, the handoff from temporary liquidity to ‘not QE’ T-bill purchases may end up being more abrupt than risk markets are comfortable with.

Case in point: as seen in Chart 3, in the months after the initial spike due to Lehman, some of the Fed’s temporary liquidity programs started to see less usage as the panic subsided. This led to actual reserve declines as QE1 took some time to replace them. On a smaller scale, there is risk of a similar sort of repeat in 1H20. For example, if repo usage dropped to normal levels (i.e. as they were used pre-crisis), repo assets at the Fed could drop by over $200 bn (it would take over 3 months to replace those reserves via T-bill purchases).

Curve Could Steepen

Further complicating matters, if the Fed only buys T-bills they may end up enriching enough to encourage money market funds to start using the RRP again (which would drain reserves from banks). If that were to occur, the Fed would likely need to start buying out the curve and buy less T-bills (maybe via a curve control process through 5s). At that point they would need to stop their line that their purchases are “not-QE” (it would clearly be QE). This would favour staying with steepeners outright and/or on a forward basis as the front part of the curve (eg 2ys) would start to get depressed by this QE.

One way the Fed could avoid having to morph the T-bill purchases into outright QE would be to figure out how to launch a standing repo facility soon. This would be akin to ‘QE on demand’ but more so for reserve expansion for banks whenever they actually need it. All of these moving parts highlight how difficult it becomes for a central bank that is increasingly active on providing cash and collateral to the marketplace.

Bottom Line: This all feels very technical but, unfortunately, it’s the world we live in since the Fed needs to provide reserves in ample supply to keep using the floor system to set rate policy. If and when we fall back into a recession and real QE returns, watch out. In many ways that is what risk markets are yearning for: forward expectations of QE. Meanwhile, as we wait the risk is that the Fed’s balance sheet can actually temporarily shrink before growing (slowly via the T-bill purchases). Such a scenario is not priced into most asset classes.

Almost exactly one year ago today, the stock market was tumbling and on December 24, 2018 was set to post its first 20% “bear market” correction since the financial crisis. However, not even the most jittery market since the financial crisis, one which saw virtually every major asset class post sharply negative returns,  managed to sap the sellside analyst crew of its traditional optimism.

As a reminder, at the start of December 2018 Bloomberg calculated that of the 14 forecasts for 2019 from firms it tracks, the average prediction was for the S&P 500 to rise 11% to 3,056 by the end of 2019. And while the steepness of the forecast path reflected the recent damage done to stocks, it was the most optimistic call since the bull market began in 2009.

In retrospect, three Fed rate cuts later, the launch of QE4…

… the fastest expansion of the Fed’s Balance sheet since the financial crisis…

… and the most aggressive rate cuts by central banks since the financial ctisis…

… and Wall Street’s optimism one year ago turned out to be too conservative, with the S&P now trading at an all time high of 3,150, almost 100 points above the average year-forward S&P forecast one year ago of 3,056.

And to think it only took a crisis-like response by central banks to achieve it.

So what happens next year? Well, this is the strange part, because whereas Wall Street was euphorically bullish one year ago even as stocks were tumbling, this time with the S&P up 25% for the year (the best annual performance since 2013)  even Wall Street’s most reliable optimists are starting to sound like cranks, as Bloomberg’s Lu Wang points out.

Take Binky Chadha, Deutsche Bank’s chief global strategist, who one year ago was among the most optimistic of sellside analysts as he saw the S&P 500 rising to 3,250 this year – the highest of anyone tracked by Bloomberg – and yet who now expects the S&P to do absolutely nothing in the coming year. Why? Because according to Chadha, the market has already priced in a strong rebound in macro and earnings growth, “back up to the peaks of this cycle, much stronger than we expect.”

Chadha’s pessimism reduces to the following sequence of numbers, in which the final number is a clear outlier:

• 19.6%
• 25.7%
• 20.5%
• 27.3%
• 15.5%
• 10.8%
• 13%
• 16%
• 13.3%
• 18.7%

and…

• 0%

What are these numbers?

Well, after a decade of forecasting large double digit returns in the S&P 500 in his year ahead outlooks, Deutsche Bank’s chief equity strategist Binky is finally expecting a flat market, or a 0% return for all of 2020, as his 2019 and 2020 S&P estimates are the same, or 3,250 (technically, Chadha expects a 3.3% return to the end of 2020 from current levels). While we will present some more from Chadha’s forecast in a subsequent post as it touches on some key market fundamentals, this is why one of the formerly most bullish Wall Street analysts expects a largely disappointing sideways market next year:

We see EPS of $175; a multiple of 18.5x; and set a 2020 year-end target for the S&P 500 of 3250. This would represent a very modest increase (+3.5%) from last week’s close. Indeed it is the same as our target for 2019, which if achieved by this year-end, would imply a sideways market in 2020. Both a maintenance of the 10-year trend channel of the S&P 500 (+10% to the bottom in end 2020; +23% to the middle), and our demand-supply framework (+10%) with lower but still robust buybacks, could be used to argue for much stronger returns. But we see the market already pricing in a strong rebound in macro- (ISM 57) and earnings growth (+15%), back up to the peaks of this cycle, much stronger than we expect. Equity valuations (19.1x) are at the high end of their historical range (mostly 10x-20x), having been higher (ex the late 1990s equity bubble) only 10% of the time over the last 85 years, while a continued normalization of payout ratios argues for a modest de-rating. The US presidential election should make it difficult for the fundamental uncertainty emanating from US trade policy, which has plagued corporates and been a key driver of the US and global growth slowdowns, to dissipate completely. This argues for a break in the downward trajectory of growth and some bounce, not a rebound to the peaks of this cycle as the market is pricing. With key measures of CEO confidence down at recession levels, we see the risks to the outlook as being to the down side.

Of course, that “other” reason for the surge in stocks, the record stock buybacks – which is how corporate management teams translated the world’s ultra low interest rates into higher stock prices by way of record BBB-rated debt issuance – is also starting to fade, which only substantiates Chadha’s skeptical outlook.

What is remarkable is that Chadha is hardly the sole bull turned bear on the year ahead: as Bloomberg calculates, the Deutsche Banker’s skepticism is the prevailing sentiment as Wall Street strategists are giving the least optimistic annual outlook in 15 years, with an average call among 17 estimates being for the S&P 500 to end next year at 3,280. As of Friday’s close, that represents a 4.3% expected increase, the smallest for any year since 2004.

Chadha key concerns for the coming year – summarized above – also happen to be the reason why so many traditionally cheerful strategists are far more pessimistic this time around:

• Pulling returns from the future: the market’s impressive rise in 2019 has reduced the size of the advance analysts see in 2020.
• Strategists are concerned about the relatively anemic earnings growth upon which this year’s rally is based. As we noted repeatedly in the past, and as Goldman stated two weeks ago, all of this year’s gains are the result of multiple expansions and wider valuations, a trend few see continuing. As a reminder, this is what Goldman said in its 2020 year ahead forecast: “With S&P 500 earnings on track for roughly zero growth from this time last year, solid returns likely would not have been possible without central bank support.” As of this moment, consensus is that central banks won’t be nearly as generous as they were in 2019, although all that would be required to change this is another 10%-20% drop in the S&P.

Here it is worth recalling that while strategists can be more or less optimistic any one year, they will never – as a group – call for a lower market in the year ahead. Indeed, as Bloomberg notes, “analysts have never called for a down year in the period Bloomberg has tracked them.” Which is why the notable step down in the 2020 forecast is remarkable; meanwhile, those optimists who see the remarkable rally of 2019 continuing are in for disappointment, as “betting on a repeat of 2019 would be a mistake, considering such key risk factors next year as the U.S. presidential elections and a re-escalation of trade tensions.”

Even more remarkable, at least three strategists expect the S&P to be lower in 2020 compared to Dec. 31, 2019. Among them are the now traditional bears, such as Morgan Stanley’s Mike Wilson and UBS’ Francois Trahan, both of whom have a year-end target of 3,000, while Sophie Huynh at Societe Generale has 3,050.

Meanwhile, there are fewer surprises on the bullish side where Bloomberg notes that for the second year in a row, Jonathan Golub at Credit Suisse has the highest sellside forecast, with a 3,425 target on the S&P: “Citing an improving earnings outlook and relatively attractive valuations, Golub says it’s too early to bail even with the record-long bull market heading toward its 12th year.”

That said, at 19.1x trailing earnings, the S&P 500 is trading at a multiple that’s higher than any time since the dot-com era, except for a few months in late 2017 and early 2018. As Chadha writes, “the S&P 500 trailing multiple has historically mostly stayed in a range between 10x-20x. So current valuation at 19.1x is clearly at the higher end of the historical range. Indeed, over the last 85 years, outside the late 1990s equity bubble, the multiple remained below current levels around 90% of the time. Moreover, episodes when the multiple did rise above current levels were often associated with markets exiting recessions as stock prices rose sharply in anticipation of a recovery in earnings that was still to materialize.”

Still, as Bloomberg notes, with the Federal Reserve in an easing mode and Treasury yields hovering near record lows, stocks can continue rising as multiples expand ever more into excessively over-valued territory.

On the other hand, the only other time all three central banks were easing at the same time as they are now, was during the financial crisis:

As such, it will be difficult to keep injecting hundreds of billions of freshly “printed” liquidity into the market without someone finally asking if the global economy finds itself in another crisis right now to justify such a massive liquidity euphoria.

Which brings up one final question: what happened when Wall Street Strategists were as bearish as they are now, and forecast gains of 5% or less? Well, in 2014 and 2017, they ended up under-shooting by at least 7% points according to Bloomberg, and in 2005, they were right on target.

“It’s important to understand what the consensus is,” said Palisade Capital CIO Dan Veru. “Expectations are very low. I always want to take the other side of that.” It wasn’t exactly clear if the “other side” of that is to expect a negative return for 2020, or for the liquidity gusher to turn into a tsunami as the world careens into a global depression and stocks explode in one final, record meltup…

The brother of late Colombian drug lord Pablo Escobar, Roberto Escobar, has released a foldable smartphone through his investment company, Escobar, Inc, that is expected to compete with Samsung Galaxy Fold 2. 

Escobar Inc. CEO Olof Gustafsson told CNN that Escobar Fold 1 is made of a proprietary plastic that “makes it almost unbreakable.” 

The foldable smartphone uses Google’s Android operating system, which comes in both 128 GB and 512 GB models. Escobar Inc.’s website retails the 128 GB version for $349 and 512 GB for $499.

“Our phone has gone through rigorous testing,” Gustafsson said.

“The only true way to break our phone is to burn it, which I would imagine an average user would not do.”

Mostly blind and deaf from a letter bomb that exploded in his face in prison in the early 1990s, Roberto has aspirations of dominating the foldable smartphone space and compete with giants like Samsung.  

“We want to beat the competition,” Gustafsson told CNN.

“We figured out very fast that if we make a good telephone that folds for a reasonable price, we can sell many units. And that is what is happening now.”

Roberto wants to be a direct competitor with Samsung’s Galaxy Fold 2, which is expected to launch in 1Q20 and retail for $1,000. 

Escobar Inc.’s website promotes the smartphone as the answer to your prayers, including a price that makes it an affordable foldable smartphone. 

The website landing page has three videos, attempting to convince consumers why Escobar Fold 1 is something they need. 

One video shows beautiful women in a mansion playing with the phone…

Several other videos show the phone in operational use.

We remain skeptical as to whether this is actually a real phone, considering it’s being sold by the brother of a former Colombian drug lord who, at one point, controlled 80% of the world’s cocaine market.

Authored by Charles Hugh Smth via OfTwoMinds blog,

The frantic efforts of an exploitative elite to eliminate dissent only accelerates the regime’s path to collapse.

Regimes that are losing public support always make the same mistake: rather than fix the source of the loss of public trust–the few enriching themselves at the expense of the many– the regime reckons the problem is dissent: if we suppress all dissent, then everyone will accept their diminishing lot in life and the elites can continue on their merry way.

What the regimes don’t understand is dissent is the immune system of society: suppressing dissent doesn’t just get rid of pesky political protesters and conspiracy theorists; it also gets rid of the innovations and solutions society needs to adapt to changing conditions. Suppressing dissent dooms the society to sclerosis, decline and collapse.

Dissent is the relief valve: shut it down and the pressure builds to the point that the system explodes. Regimes that no longer tolerate anything but the party line fall in one of two ways: 1) the pressure builds and the masses revolt, tearing the elite from power or 2) the masses opt-out and stop working to support the regime, so the regime slowly starves and then implodes.

Here in the U.S., the suppression of dissent is the work of the corporate media and the Big Tech monopolies: Facebook, Twitter and Google.  As Mark St.Cyr and I discuss in a new no-holds-barred podcast (1:08 hours, 4 segments), Big Tech is effectively suppressing dissent via shadow banning, de-platforming and de-monetization:

— shadow banning: the audience who gets to see your content is throttled back to a fraction of your pre-shadow-banning audience. The mechanics are shrouded in secrecy, Stasi-style.

— de-platforming: the Big Tech monopoly declares you persona non grata for a supposed violation of their Kafkaesque Terms of Service and bans your content from their platform, effectively silencing you.

— de-monetization: your content is still officially on the platform in truncated form, but the flow of advertising revenue is turned off: you’re welcome to post content but you will no longer be able to make any money from it. Enjoy!

When you crush dissent and spend a full year cracking the skulls of protesters, you end up with, well, France’s general strikes. I covered the yellow vest protests in some depth a year ago: France in a Nutshell: “The Government Stopped Listening to the People 20 Years Ago” (December 12, 2018)

France’s Ghosts of ’68: General Strike vs. Macron and the Technocrat Elites (January 16, 2019)

Here in the U.S., the crushing dissent gathered momentum when all dissent was lumped into the tarpits of “fake news” and “Russian propaganda.” What better way to throw the baby out with the bathwater than declare any dissent from the approved party line “fake news” and/or “Russian propaganda.” The catalyst was a completely fake “list of Russian agents” assembled by an unidentified source called PropOrNot in 2016.

The Washington Post and other corporate media outlets immediately published the baseless accusations without bothering to seek the identity of the accusers or establish any sort of objective standards to judge the validity of the accusation. It was pure Orwell, as I explained at the time: The Washington Post: Useful-Idiot Shills for a Failed, Frantic Status Quo That Has Lost Control of the Narrative (November 27, 2016)

In police-state fashion, Big Tech took the list of accused (including this site), declared all those named guilty and promptly shadow-banned, de-platformed or de-monetized us all without coming clean about how they engineered the crushing of dissent.

In classic Stasi fashion, the mechanics are all black box: the accused are never confronted with their accuser, never provided with the evidence of their “crime,” and never given an opportunity to defend themselves against the false accusation.

Everyone on the PropOrNot list was declared guilty until proven innocent, but there was no way to prove our innocence. Kafka, meet Orwell: a completely opaque, privately owned Stasi (Facebook, Twitter, Google) does the elites’ dirty work, concealed behind the impenetrable bureaucracy of algorithms, secret guidelines and Terms of Service which can be interpreted in whatever way serves the gatekeepers’ interests.

Suppressing dissent guarantees disorder and collapse. Ironic, isn’t it? The frantic efforts of an exploitive elite to eliminate dissent only accelerates the regime’s path to collapse.

Mark St.Cyr and I discuss these topics as only those who’ve been suppressed can in our recent podcast. (1:08 hours, 4 segments)

I’ve addressed the critical role of dissent and the suppression of dissent many times; here’s a selection of recent posts:

The Essential Role of Volatility, Stress and Dissent (May 24, 2014)

When It Becomes Serious, First They Lie–When That Fails, They Arrest You (March 16, 2015)

The Demise of Dissent: Why the Web Is Becoming Homogenized (November 17, 2017)

The West’s Descent into ‘Cultural Revolution’ (January 18, 2019)

Which One Wins: Central Planning or Adaptive Networks? (February 19, 2019)

The New Orthodoxy: Blasphemy, Heresy and the New Inquisition (September 19, 2019)

My recent books:

Will You Be Richer or Poorer? Profit, Power and A.I. in a Traumatized World (Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

It has been over two months since House Speaker Nancy Pelosi announced the impeachment inquiry of President Trump, and CNN has been running non-stop coverage of all the latest impeachment developments. In retrospect, that may not have been the best idea: with round the clock coverage, viewership of the rabidly partisan, far-left media outlet has actually tumbled to three-year lows, reported Nielsen Media Research. 

Nielsen reported that CNN recorded its lowest prime time ratings in nearly three years during the week of November 25. Even more embarrassing for Jerry Zucker, Fox News recorded higher ratings than MSNBC and CNN combined. 

Fox News recorded 2.2 million viewers in the primetime hours of 9-11 p.m. ET from Nov. 25 through Dec. 1; MSNBC saw around 1.3 million, while CNN averaged about 643,000 viewers over the same period. It was CNN’s worst performance in nearly three years and the liberal network’s worst turnout among the key demographic of adults age 25-54 in over five years.

Primetime Viewers

• Fox News: 2.2 million
• MSNBC: 1.3 million
• CNN: 643,000

Fox News has dominated the cable news arena for the 47th consecutive week, averaging a little over 1.3 million viewers.

Total Day Viewers

• Fox News: 1.33 million
• MSNBC: 781,000
• CNN: 539,000

As CNN plumbed historic lows, its conservative foil continued to enjoy strong viewership, as episodes of “Hannity,” “Tucker Carlson Tonight,” “The Ingraham Angle,” “The Story with Martha MacCallum” and “Special Report” with Bret Baier accounted for 15 of the 30 most-watched telecasts across all of cable during the holiday weekend.

Is CNN’s Trump derangement syndrome starting to bore most Americans, even liberals? Consider that the network’s special town hall event with House Speaker Nancy Pelosi on the day she announced that articles of impeachment against President Trump were being drafted only averaged 1.6 million viewers and 410,000 in the demo on Thursday night, well behind both Fox News and MSNBC in both categories.

The American people, at least those who still watch cable TV, are increasingly ditching “objective”, “imparial” mainstream media outlets and either tuning out or moving to conservative outlets, in a time when House Democrats have been focused on just one thing: not how to govern the nation, but merely focusing all their energy on impeaching the president. It appears, however, that the American people are tired of this farce and are desperate to move on. So far very few democrats have gotten the memo.

Just two days after North Korea resumed its “dotard” insults at President Trump, North Korea’s ambassador to the United Nations said on Saturday morning that further denuclearization talks are no longer needed with the Trump administration as it appears negotiations have stalled, reported Reuters. 

In a statement to Reuters, NoKo ambassador, Kim Song, said: “We do not need to have lengthy talks with the US now and denuclearization is already gone out of the negotiating table.”

He added that “sustained and substantial dialogue” sought by the Trump administration was a “time-saving trick” to accommodate its domestic political agenda, likely referring to the upcoming election year where President Trump is trying to get as many wins as possible to fulfill talking points of first-term success. 

We noted on Friday that there was less than a month to go before North Korea’s self-imposed end of year deadline to cut off nuclear negotiations with Washington if no new concessions were given in the path towards denuclearization. 

President Trump has told reporters he has a “good relationship” with Kim Jong Un, though he has said the US reserved the right to use military force against Pyongyang. 

With talks stalled and denuclearization off the table, it appears that the US and North Korea have wasted several years in discussions and have accomplished absolutely nothing. 

As Kim and President Trump are back at flinging insults at one another amid a breakdown in talks, North Korea said it’s preparing a “Christmas gift” for the US, likely in the form of a new intercontinental ballistic missile (ICBM) launch. 

Stay tuned as geopolitical uncertainty on the Korean Peninsula could erupt into the new year with a 20 megaton bang.

Cowboys owner Jerry Jones was yanked off a Dallas radio station for berating the hosts in a foul-mouthed tirade.

Calling in to the team’s official radio home, 103.5 the Fan in Dallas just 12 hours after the team’s 31-24 defeat to the Chicago Bears, Jones started off salty according to the Washington Post. 

“Get your damn act together yourself, okay? Now, we’re gonna have a good visit this morning, but settle down just a little bit,” he said, when asked if he was embarrassed by the loss.

Jerry Jones asked by hosts on ⁦@1053thefan⁩ if he’s “embarrassed” responded by saying “get your damn act together” and saying he doesn’t “have the patience to jack with you today.”

😳 pic.twitter.com/FmHM7crsKC

— Will Brinson (@WillBrinson) December 6, 2019

“I don’t like your attitude to come in,” he continued. “I’ve been traveling all night and I don’t have the patience to jack with you today.”

Then things got more heated as Jones claimed he couldn’t discuss specific personnel decisions due to league tampering rules – and that he wouldn’t truthfully answer the hosts’ questions even if he were allowed to do so.

“Do you understand bullshit?” Jones asked the hosts.

After Jones swore for a second time, the station’s ‘dump-out delay system’ designed to prevent swearing automatically ended the call while the hosts asked Jones if he thought the team had quit on Coach Jason Garrett.

Jones returned to the air and managed to keep things G-rated.

“We’ve seen this team play better than this in recent times,” Jones said. “So you aren’t being totally unrealistic if you expect better play from certain areas of the team. …

“As far as quitting on Jason Garrett, you gotta remember that when you quit on your coach, then you quit on yourself, because we’re all a part of this. … The one that deserves the most responsibility is the one that ultimately makes the decision to put what players out there and put what coach out there. That’s the general manager and, in this case, it happens to be the same man that owns the team, and I completely understand the fans’ frustration with me.”

Jones wrapped things by saying “we all feel like hell” and talking about how he deals with such stress. –Washington Post

“What I do is I scream in my pillow,” said Jones. “That low, low, eerie thing you’re hearing across Dallas? That’s me, screaming in my pillow.”

Authored by James Rickards via The Daily Reckoning blog,

Markets are eagerly awaiting the conclusion of the so-called “phase one” trade deal between the U.S. and China.

Both parties are trying to reach a mini-deal involving simple tariff reductions and a truce on new tariffs along with Chinese purchases of pork and soybeans from the U.S.

The likely success or failure of the mini-deal has been a main driver of stock market action for the past year. When the deal looks likely, markets rally. When the deal looks shaky, markets fall.

A deal is still possible. But investors should be prepared for a shocking fall in stock market valuations if it does not. Markets have fully discounted a successful phase one, so there’s not much upside if it happens.

On the other hand, if phase one falls apart stock markets will hit an air pocket and fall 5% or more in a matter of days.

But even if the phase one deal goes through, it does not end the trade wars. Unresolved issues include tariffs, subsidies, theft of intellectual property, forced transfer of technology, closed markets, unfair competition, cyber-espionage and more.

Most of the issues will not be resolved quickly, if ever.

Resolution involves intrusion into internal Chinese affairs both in the form of legal changes and enforcement mechanisms to ensure China lives up to its commitments.

These legal and enforcement mechanisms are needed because China has lied about and reneged on its trade commitments for the past 25 years. There’s no reason to believe China will be any more honest this time around without verification and enforcement. But China refuses to allow this kind of intrusion into their sovereignty.

For the Chinese, the U.S. approach recalls the Opium Wars (1839–1860) and the “Unequal Treaty” (1848–1950) whereby foreign powers (the U.K., the U.S., Japan, France, Germany and Russia) forced China into humiliating concessions of land, port access, tariffs and extraterritorial immunity.

China has now regained its lost economic and military strength and refuses to make similar concessions today.

In order to break the impasse between protections the U.S. insists on and concessions China refuses to give.

This points to the fact that the “trade war” is not just a trade war but really part of a much broader confrontation between the U.S. and China that more closely resembles a new Cold War.

This big-picture analysis has been outlined in a speech given by Vice President Mike Pence in October 2018 and a follow-up speech delivered on Oct. 24, 2019. Both speeches are available on the White House website.

Secretary of State Mike Pompeo has also added his voice to the hawks warning that China is a long-term threat to the U.S. and that business as usual will no longer protect U.S. national security.

Pictured above are Vice President Mike Pence (l.) and Secretary of State Mike Pompeo (r.). Pence and Pompeo have taken the lead in the public criticism of China by the Trump administration. In a series of speeches and interviews they have pointed out egregious human rights violations, blatant theft of intellectual property and threatening military advances that should cause the U.S. to treat China as more of a geopolitical adversary than a friendly trading partner.

The views of Pence and Pompeo, often captured under the heading of the Pence Doctrine, were neatly summarized by China expert Gordon G. Chang, author of The Coming Collapse of China, in a Wall Street Journal Op-Ed on Nov. 7, 2019, quoted below:

The Trump administration is heading for a fundamental break with the People’s Republic of China. The rupture, if it occurs, will upend almost a half century of Washington’s “engagement” policies. Twin speeches last month by Vice President Mike Pence and Secretary of State Mike Pompeo contained confrontational language rarely heard from senior American officials in public.

“America will continue to seek a fundamental restructuring of our relationship with China,” the vice president said at a Wilson Center event on Oct. 24 as he detailed Chinaʼs disturbing behavior during the past year.

Some argue the vice presidentʼs talk didnʼt differ substantively from his groundbreaking October 2018 speech, but these observers fail to see that in the face of Beijingʼs refusal to respond to American initiatives, Mr. Pence was patiently building the case for stern U.S. actions.

Moreover, the vice presidentʼs thematic repetition was itself important. It suggested that the administrationʼs approach, first broadly articulated in the December 2017 National Security Strategy, had hardened. That document ditched the long-used “friend” and “partner” labels.

Instead it called China — and its de facto ally Russia — “revisionist powers” and “rivals.”

At a Hudson Institute dinner last Wednesday, Mr. Pompeo spoke even more candidly: “It is no longer realistic to ignore the fundamental differences between our two systems and the impact… those systems have on American national security.” Chinaʼs ruling elite, he said, belong to “a Marxist-Leninist party focused on struggle and international domination.” We know of Chinese hostility to the U.S., Mr. Pompeo pointed out, by listening to “the words of their leaders.”

The U.S.-China trade war is not the anomaly globalists portray. It’s not even that unusual viewed from a historical perspective. Retaliation from trading partners is all in the game.

Free trade is a myth. It doesn’t exist outside classrooms. France subsidizes agriculture. The U.S. subsidizes electric vehicles. China subsidizes a long list of national champions with government contracts, cheap loans and currency manipulation. Every major economy subsidizes one or more sectors using fiscal and monetary tools and tariffs and nontariff barriers to trade.

Trump’s tariffs on China in January 2018 were reputedly the start of a trade war, but the war was actually begun by China 24 years earlier when China devalued its currency (1994) and continued when China joined the WTO (2001) and immediately started to break WTO rules.

The trade battle is now joined, but no critical issues have been resolved and none will be in the near future. The U.S. cannot accept Chinese assurances without verification that intrudes on Chinese sovereignty.

China cannot agree to U.S. demands without impeding its theft of U.S. intellectual property. This theft is essential to escape the middle income trap that afflicts developing economies.

The EU is caught in the crossfire. The U.S. is threatening to impose tariffs on German autos and French agricultural exports as part of an effort to force an end to German and French subsidies to favored interests.

The U.S. will win the trade wars despite costs. China will lose the trade wars while maintaining advantages in intellectual property theft. Trade wars will continue for years, even decades, until China abandons communism or the U.S. concedes the high ground in global hegemony.

Neither is likely soon.

Despite the US sanctions and propaganda war against Iran continually heating up since the hot summer of ‘tanker wars’ and September’s Saudi Aramco attacks blamed on Tehran, it appears there’s still some behind the scenes diplomacy happening, or at least indirectly via European mediation. 

The White House on Saturday celebrated the release of Xiyue Wang, a Chinese-American graduate student detained in Iran since 2016, in a statement. “After more than three years of being held prisoner in Iran, Xiyue Wang is returning to the United States,” Trump said just after Wang was handed over to US authorities in Switzerland. 

The release was secured through a prisoner swap with Tehran, with the negotiation of the Swiss as a ‘middle man’. In return the US released Iranian scientist Masoud Soleimani.

The Iranian scientist had been arrested by US authorities a year ago on charges of violating trade sanctions against Iran, but was reportedly expected to be released soon. 

As for the American graduate student, he was a Princeton University scholar who while researching Iran’s Qajar dynasty for his Ph.D. inside the Islamic Republic was arrested August 2016.

After being sentenced to ten years in prison on charges of “spying” he was held at Tehran’s notorious Evin prison, where the country holds high profile political prisoners. 

The indictment and trial records had been kept secret, given Princeton had issued a public statement saying it was prevented from obtaining any information on the case. 

Glad that Professor Massoud Soleimani and Mr. Xiyue Wang will be joining their families shortly. Many thanks to all engaged, particularly the Swiss government. pic.twitter.com/1TeZUL0CDG

— Javad Zarif (@JZarif) December 7, 2019

The Iranian side was also celebratory on Saturday, with Iran’s foreign minister seen personally escorting Professor Massoud Soleimani back home.

Trump announced of the rare prisoner exchange, “We thank our Swiss partners for their assistance in negotiating Mr. Wang’s release with Iran.” He added, “The highest priority of the United States is the safety and well-being of its citizens. Freeing Americans held captive is of vital importance to my Administration, and we will continue to work hard to bring home all our citizens wrongfully held captive overseas.”

And Secretary of State Mike Pompeo said separately, “We continue to call for the release of all U.S. citizens unjustly detained in Iran.” He also gave rare acknowledgement that “Tehran has been constructive in this matter.”

Authored by Chris Martenson via PeakProsperity.com,

As we look at the multiplying signs of failure across our economy and the environment, society is slowly realizing that we need to start doing things very differently. 

At least if we want a positive future in which we can believe. Those awakening to this are asking: What should we do?

I think a better question to ask is: What’s possible?

That’s the question that has been waking me up early in the morning for the past few weeks.

It springs from Ben Falk’s book on whole systems design and permaculture entitled The Resilient Farm and Homestead.  It’s a great book, packed with lots of useful ideas and systems to consider.

It’s opening line reads:

“Regeneration involves seeing things as they could be, while resiliency requires dealing with things as they are.”

I like that pairing a lot.  It’s ‘what is’ AND ‘what could be’  Resilient AND regenerative.  It’s combining what you already have with what’s possible.

Why Regeneration Matters

Regeneration is about the future.  In working with living systems, the soil, the microclimate, the sun and a dozen other major variables all come into play.   To be of a regenerative mindset, one must be able to see both what’s there AND what isn’t there yet, but could be.

Each acre of land or water source is more capable of doing certain things than others.  The same is true with people, communities and cultures.

Where Joel Salatin found a farm with ruined soils (listen to our podcasts with Joel on regenerative farming and on ‘rogue farming’), he knew it was possible to rebuild the soils to incredible depth and abundance without using any outside inputs.  He showed that a whole new approach could yield results that had entirely escaped the previous owners of that land.  He saw what they didn’t, or perhaps, couldn’t (all hail the blinding power of belief systems!).

Where the founders of Singing Frogs Farms saw local organic competitors grossing $17,000 per acre, they showed what’s truly possible by ‘farming the soil’ and yielding $100,000+ gross revenues per acre.  Their operation is regenerative for the landscape, their workers, and their many loyal customers.  (Listen to our podcasts with Paul and Elizabeth Keiser here and here).

To place this concept within a business metaphor, if resiliency is having multiple jobs, regeneration is about starting your own successful business after noticing what wasn’t already there (but could be).

Business resilience is having a deep inventory in case of supply disruptions, or a solid balance sheet to weather the inevitable downturns.  Regenerative businesses have cultures that allow for fresh ideas to emerge and change the company even if they challenge existing products or services.  More than that, regenerative managers value these innovative ideas, products and practices because evolution is the lifeblood of longevity.

Resilience: The Critical First Step

For a long time, my fellow co-founder Adam Taggart and I have been all about helping people become more resilient.

That’s a worthy goal, one we’ll continue to promote.  Resilience is critical to future prosperity, and it must be cultivated. Full stop.

However, it’s not an end point.  What is the overarching goal driving our efforts to become more resilient? This is a question we’re hearing from the cadre of Peak Prosperity members who have successfully built up resilience across all the 8 Forms of Capital.

Once you’ve achieved resilience, then what? What is it exactly that we are seeking afterward?  What problems are we hoping to solve?  What would the world look like if we could design it exactly as we wished?

In his book The More Beautiful World Our Hearts Know Is Possible, Charles Eisenstein asks, “In a time of social and ecological crisis, what can we as individuals do to make the world a better place?”  The answer, at least in part, is to begin to allow ourselves to imagine ‘what’s possible,’ without necessarily having a single clue as to how to achieve that or even what the next steps might be.

Whatever is going to come next, by definition, will emerge. And it will require the deep dedication of passionate souls to envision ‘what’s possible’ long enough for it to take root and grow.

‘I Can’t Go On, I’ll Go On’

Is there any more worthy goal in life than to make a difference, especially in trying times?

Those of us who can see the broad outlines of the coming difficulties society will face have a choice to make: Do we want to play an active role in the recovery?

This has been a refrain around here at Peak Prosperity for a long time. One resonant moment for me was back in 2016 when I first had the chance to interview elder wisdom scholar and philosopher Stephen Jenkinson.

We were discussing the tyranny of hope; specifically how to be in these troubled times, when Stephen said:

Samuel Beckett, the great Irish writer. He has a book title. And the book title says what you and I are talking about right now. The name of the book is; I can’t go on, I’ll go on.

Now, if you do not pay attention to how he has phrased it, you think what he is saying is I cannot go on; I can go on. But he doesn’t say that. See, that is hopeful and hopeless again.

He says I can’t go on, I’ll go on. And at the risk of cheapening an elaborate and well accomplished book just by making a phrase of the title, I believe his title says this:

I have an obligation in a troubled time to go on, not being able to.

If you let that stand and you do not try to resolve that, and you recognize the inability to go on is no more predicting of the outcome than the ability to go on is. Neither one of these foreclose on what may yet come to pass.

However, the depths of the trouble mean that there is such a thing as not being able to go on and you turn away from that at your peril. The recognition that you cannot go on is a real time in people’s lives. It is not a failure, moral or otherwise, it is not a collapse. It is a true thing, and it takes courage to know that you are at a time when you cannot go on. And what Beckett is saying is, there come times in our lives when we go on not being able to.

(Source)

He described exactly how I feel; that I have an obligation in a troubled time to go on, and not being able to.  Obligated, but with little more than a push from behind that says “Somebody has to do something, and that person includes you.”

There’s not a lot of instruction beyond that.

So we can’t go on, yet we will go on.  Such are the troubled times in which we live.

Conclusion

The tides are turning. The social mood darkens. The Fourth Turning is upon us.

Despite all the attempts to force happiness on society based on record stocks and bonds prices, fewer and fewer folks are feeling the joy.

“More of the same” is no longer compelling.

Instead, people are increasingly hungry for new ideas and new paths that offer compelling solutions

Don’t look to the government to help. It’s proving it’s dominated by mainstream politicians who aren’t aware of exactly what’s at stake or how to go about addressing it.

Don’t look to the private sector, either. Corporations are mostly locked in a battle for a pie of profits that has stopped growing.

So, it’s up to us.  You and me.  We’ve got to figure out what new models will yield a sustainable, prosperous and happy future.

Though to be truly compelling and sufficient, these solutions will  have to go beyond ‘resilience’.  If a storm is coming, resilience is exactly what you want.  But if a hundred years’ drought is settling in, you’ll need more than well-stocked supplies.  You’ll need regenerative systems to weather through something that long in duration.

We’ll need each other in new and more profound ways. Ways that combine both resilience AND regeneration.

It’s time to find out what’s possible.

Now, a number of you readers are aware I’m hard at work on designing a living community that is both resilient and regenerative.

In Part 2: A Vision For Living Regeneratively, I share my current notes on the process. What key success requirements am I settling on? What models make the most sense? Beyond the physical factors of the land and housing, what community and cultural factors need to be adopted?

To fail to plan is to plan to fail. To successfully transition to a sustainable, happy and prosperous future, we need good plans (the more the better!) and I am making the development of this one a top priority. Both for myself as well as society — as anyone who wants to borrow (and improve upon!) it will be more than welcome to.

Are you willing to join us in developing the answer to: What’s possible?

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