Treasury Yields Are Crashing-er

The entire bond complex has come under pressure here with 2Y through 30Y all seeing yields jerk lower. 10Y and 30Y yields are back at the flash-crash Bullard Lows of Oct 16th… as yet another squeeze of record Treasury Shorts blows the minds of every talking head on CNBC…


From the close of the day when Jim Bullard saved the world!!!


explained by this.. .the asset class that stumped everyone in 2014: Treasurys.

10-yr T-notes


Large speculators strongly increased their net short position to -$16.3bn from -$7.5bn notional.
Bearish. The Dec-01 Outside Bar and impulsive break of 2.227% points to
further gains to 2.404% and beyond. Below 2.227% indicates stalling;
bulls gain control below 2.150%

Actually, not “bearish” but “short coveringish”…

Charts: Bloomberg

via Zero Hedge Tyler Durden

What’s The Biggest Loser Since Oil Prices Peaked?

Since oil prices peaked in June this year, there is one clear loser (according to the narrative) – Russia. Russian stocks have dropped 41% during that time and the entire Russian market capitalization is now only 60% of Apple! And while Greece’s recent demise has it close to being the worst performer of the year, it’s not quite. However, since oil peaked in June, both Russia’s and Greece’s epic demise is trumped by another stock market index…


Year-to-date, Russia is the biggest loser with Greece’s recent demise catching down to it quickly…


With Russia’s entire market cap now only 60% of that of Apple…


But since oil peaked, there is a clear loser… The US Oil E&P sector…


Still unequivocally good?

Charts: bloomberg

via Zero Hedge Tyler Durden

WATCH: Stand with Hillary Part 2 (Featuring Remy)

Remy helps the
Stand with Hillary super PAC
come up with a new music

“Stand with Hillary: Part 2 (Arkansas Badonkadonk)” is the
latest from Reason TV. Watch above or click the link below for full
lyrics, downloadable versions, and more.

View this article.

from Hit & Run

House Oversight Committee Subpoenas Obamacare Work and Contract Details

In sworn congressional testimony on
Tuesday, MIT economist and Obamacare architect
repeatedly refused to immediately provide details of the contracts,
payments, and work he’d produced
as a health law consultant to
multiple states and the federal government. Reports suggest that
Gruber has received millions of dollars for his work over the

Gruber did not submit the standard disclosure form before his
testimony. (Gruber said that he had been advised by his lawyer that
the alternative disclosure he submitted was in compliance with
committee requirements.) He said that he had received nearly
$400,000 for his work modeling the effects of Obamacare for the
federal government, a number that has been widely reported, but
when asked for additional information, he repeatedly
members of the House Oversight Committee that they could
take it up with his lawyer. He was warned that if he continued to
respond that way, the work would be subpoenaed. 

As of this morning, Oversight Committee Chairman Darrell Issa
(R-Ca.) has followed through with a formal request for the
documents. According to a press release, the

1. All documents and communications to or from any federal,
state, or local government employee, including, but not limited to,
any document or communication referring or relating to the
Affordable Care Act or federal and state health care exchanges.

2. All documents and communications referring or relating to
funding, for research or otherwise, from any federal, state, or
local government agency, including, but not limited to, any
contract(s) with a federal, state, or local government agency.

3. All documents and communications referring or relating to
work product produced to any federal, state, or local government
agency, for any purpose, including, but not limited to, the results
of any and all economic models or simulations.

One thing to be on the lookout for when this comes through:
Gruber’s estimate of how many people would lose their existing
insurance under Obamacare.

Gruber admitted during questioning that his econometric model,
created for use by the administration and congressional staff
drafting the law, estimated that some Americans would not be able
to keep their existing health plans, but he wouldn’t say how many.
Shouldn’t that mean that Gruber knew that administration’s repeated
promises that those who like their health plans could keep their
plans under the law weren’t true?

Gruber was asked about the promise, and tried to dodge the
question by saying that he was not a political adviser. But
eventually he explained how he understood the president’s promise.
“I interpreted the administration’s comments as saying that for the
vast majority of Americans the law would not affect the productive
health insurance arrangements that they have,” he said. “I did not
see a problem with the administration’s statement.”

Of course he didn’t. Gruber is, after all, someone who
that “lack of transparency” was key to passing the
health law. Gruber wanted the law to pass, and so despite knowing
that the administration’s statement was inaccurate, he did not see
it as a problem. 

from Hit & Run

No Inflation Friday: check out the ‘Dear, John’ letter I just received

Dollar in the air No Inflation Friday: check out the ‘Dear, John’ letter I just received

December 12, 2014
Santiago, Chile

Long ago I sold almost all my possessions and left the Land of the Free.

It was a decision of optimism and adventure—I realized that there were much richer and more rewarding opportunities to do business, invest, and spend time abroad.

The only asset I keep there is a condominium in Dallas. It’s the same place I purchased more than a decade ago to be close to my father when he was diagnosed with inoperable brain cancer.

I left after he passed away, but I kept the condo so that I could have a place nearby my mother and stepfather (who still live in the area) in case the need ever arose.

Over a decade ago when I bought the place, my Homeowners’ Association dues were just barely $200 per month. And I got a lot of value for that.

Back then the dues paid for water, cable, security, gym membership… all sorts of stuff.

Since then the HOA dues have been rising steadily. This year I’ve been paying $450.38 per month.

Yet now I just received a letter notifying me that the fees will be increasing once again starting January 1st to $495.42.

That’s 10%. And that’s on top of a similar increase that I received on my medical insurance premium (after which I promptly dumped the company and switched to a much better international plan——premium members, watch out for an alert on this.)

What’s more, property taxes have gone up every single year that I’ve owned this condo.

(And in case you’re wondering, the unit is worth $20,000 LESS than what I bought it for years before the property bubble formed.)

If we are to trust the official inflation numbers the government puts out, the long-term rate of inflation hovers at around 2% per year.

But you and I both know that prices have been going up much more than that.

And even if you use their own official monkey numbers, wages haven’t kept up.

Think about it: let’s say a loaf of bread costs $1, and you make $50,000 per year. When denominated in bread, your salary is 50,000 loaves.

Next year the price of bread rises to $1.10. Your salary goes up to $51,000. Your new salary in bread is 46,363 loaves.

Even though your salary has actually increased, your standard of living when denominated in loaves of bread has decreased by 7.2%.

Certainly this is a simplistic example. But it shows that inflation is really just a form of theft.

At best, it’s an invisible tax—a transfer of wealth from responsible savers in the middle class to heavily indebted governments.

Through inflation, governments are able to reduce the real value of their debts. And at $18 trillion, the United States government is in serious need of doing so.

That’s why they lie about inflation. And it’s a lie that matters.

At 2% inflation, the average person will see prices double two times in his/her life. In other words, if the price of a widget is $1 on the day you’re born, it will probably cost at least $4 by the time you depart this earth.

Yet if inflation is ratcheted up just by a single percentage point to 3%, then you’ll see prices rise nearly EIGHT fold over the same period. And at 4%, roughly SIXTEEN fold.

Inflation is an extremely destructive force over the long-term for individuals.

Bankrupt governments have every incentive to create it. And they have even more incentive to lie about it.


After 22 Years on Death Row, Woman May See Case—Based on Word of Rogue Cop—Dropped

Debra MilkeDebra Jean Milke has been fighting for
decades a capital conviction in Arizona for allegedly arranging the
murder of her 4-year-old son in 1989. The conviction was based
almost entirely on the testimony of Phoenix Det. Armando Saldate,
who claimed she confessed in an interview. The interview was not
recorded, and she insisted she did not confess.

Saldate also had lengthy history of misconduct and lying under
oath that had been concealed from the defense. His behavior had
resulted in judges tossing out confessions or indictments in four
previous cases. Milke’s conviction was tossed out a year ago by the
U.S. Court of Appeals, 9th Circuit. Maricopa County Attorney Bill
Montgomery attempted to get Milke retried. On Thursday the Arizona
Court of Appeals
ordered the charges dismissed with prejudice
, citing “egregious
prosecutorial misconduct.” Montgomery said he will appeal this
ruling to the state’s Supreme Court.

The 2013 dismissal, written by 9th Circuit Chief Judge Alex
Kozinksi, actually spent several pages documenting all the
misconduct claims against Saldate, including “taking liberties”
with a woman he had pulled over for a faulty taillight and then
lying to investigators about it. He was suspended for five days for
that incident. You can read the
court’s ruling here
(pdf). Saldate subsequently invoked his
Fifth Amendment right not to incriminate himself in order to not
testify in Milke’s case. Two other men (one Milke’s former
roommate) have been convicted and are on death row.

Hat tip to Ken White of Popehat, who also posted about the case
last year here
and uploaded the court decision.

from Hit & Run

Canadian Supreme Court Lets Police Conduct Warrantless Cell Phone Searches of Arrestees

June 2014 the U.S. Supreme Court unanimously held that police
officers who search the cell phones of arrested individuals without
first obtaining a search warrant are in violation of the Fourth
Amendment. “Our answer to the question of what police must do
before searching a cell phone seized incident to an arrest is
accordingly simple,” declared Chief Justice John Roberts in
Riley v. California:
“get a warrant.”

The Canadian Supreme Court, by contrast, has decided to give its
country’s police officers much more room to maneuver. In a decision
handed down this week, Canada’s high court ruled that a warrantless
cell phone search incident to arrest is perfectly legitimate under
Canadian law. Sean Fine of Toronto’s Globe and Mail

has the story

In a crime ruling that earned it rare praise from the federal
government, the Supreme Court of Canada said police may search
cellphones without a warrant when they make an arrest.

Cellphones are the bread and butter of the drug trade, the
majority said in a 4-3 ruling. It said police have been given the
“extraordinary power” to do warrantless searches during an arrest,
under common-law rules developed by judges over centuries, because
of the importance of prompt police investigations. Until now, those
searches typically included purses and briefcases….

“Prompt access by law enforcement to the contents of a cellphone
may serve the purpose of identifying accomplices or locating and
preserving evidence that might otherwise be lost or destroyed,”
Justice Thomas Cromwell wrote for the majority, joined by Chief
Justice Beverley McLachlin and Justices Richard Wagner and Michael

from Hit & Run

Rider Aimed at Stopping Marijuana Legalization in Washington, D.C., Reflects Prohibitionist Weakness

The omnibus spending bill making its way through
Congress includes a provision that aims to keep marijuana illegal
in Washington, D.C., contrary to the wishes of the District’s
residents. In my latest Forbes column, I argue that
what looks like a victory for pot prohibitionists is actually a
sign of their weakness. Here is how the piece starts:

The omnibus spending bill that Congress is expected to
approve this week includes a rider aimed at blocking marijuana
legalization in Washington, D.C. Whether it actually will do that
is a matter of debate, and the way this provision was passed
suggests that pot prohibitionists are in a weaker position than
ever before.

The rider, introduced by Rep. Andy Harris (R-Md.), says
“none of the funds contained in this Act may be used to enact any
law, rule, or regulation to legalize or otherwise reduce penalties
associated with the possession, use, or distribution of any
schedule I substance.” House Appropriations Committee Chairman Hal
Rogers (R-Ky.), another ardent drug warrior, claims this
spending restriction “prohibits both federal and local funds
from being used to implement a referendum legalizing recreational
marijuana use in the District.” But that is not quite
accurate, since the rider refers to enactment, not

By contrast, an earlier version of the Harris rider dealt with
spending to “enact or carry out” decriminalization or legalization
of any Schedule I drug. Eleanor Holmes Norton, the District of
Columbia’s congressional delegate, says that difference
could prove crucial, because Initiative 71, the D.C. ballot
measure legalizing marijuana possession, home cultivation, and
sharing, “was enacted when it was approved overwhelmingly by voters
in November.” The initiative’s elimination of penalties for
specified marijuana-related activities is “self-executing,” Norton
says, requiring no additional legislation by the D.C. Council or by
Congress. In other words, the event Harris seeks to prevent has
already happened.

Read the whole thing

from Hit & Run

The GPIF Has A Warning For Japan’s Citizens: Abenomics Better Work, Or Your Pensions Are Toast

Once upon a time, the world’s biggest government pension fund, Japan’s $1.1 trillion Government Pension Investment Fund, or GPIF, was apolitical, and merely focused on preserving the people’s wealth.

Then everything changed, and with the reckless abandon of a junkie on a crack cocaine binge, aka Abenomics, the GPIF management was kicked out, and its entire mandate was flipped from preserving wealth, to gambling on #Ref! P/E stocks, in hopes of recreating the wealth effect of the super-rich (the only problem: Japan has reached its breaking point and the higher the USDJPY, and thus the Nikkei rises, the more the BOJ directly destroys its economy with an already record number of bankruptcies due to the plunging Yen getting recorder).

Worst of all, the GPIF became nothing short of the latest political pawn in what is now the the first failed Keynesian state, Japan.

Here is why this is bad. As the WSJ reports, “Japan’s $1.1 trillion government pension fund is betting that a long-term recovery and rising corporate profits will push Tokyo stock prices higher, helping the fund increase returns for the nation’s retirees.”

Mr. Abe has pushed for the fund to become a more aggressive and sophisticated investor. The fund decided in October to shift its portfolio to seek higher returns, slashing its target allocation to domestic bonds almost in half while nearly doubling that of domestic and foreign equities.


Mr. Mitani said the fund is still in the process of carrying out the changes and has a long way to go. Just under 50% of its total portfolio was in domestic bonds at the end of September, compared with its new target of 35%.



Expectations that Mr. Abe’s policies will succeed have already helped double Japan’s benchmark stock index since late 2012. Further gains would no doubt benefit GPIF’s ¥23.9 trillion ($202 billion) domestic stock portfolio.

Actually, no.

What has doubled Japan’s stock index is the collapse in the Yen. In Dollar terms the Nikkei is down for the year. Which means the only beneficiaries are those uber-rich ten or so percent who were long the Nikkei and hedged for a collapse in the Yen. For everyone else, such as the 90% of Japanese (including record number of retirement-age population) who do not participate in the market, Abenomics has so far been an absoutely epic and undisputed debacle, as confirmed not only by the soaring inflation of most products and services coupled with collapsing real wages now down for a record 16 consecutive months, but also by a misery index that is at generational highs.

Sadly, it has gotten so bad that with the BOJ at least on paper limited as to what it can buy sizewise (because the recent expansion to its QE has already been factored in by the market), means that the GPIF is now being used as a patsy that may or may not be buying more stocks in the market, just to keep the algo frontrunners at bay:

Mr. Mitani said the fund is still in the process of carrying out the changes and has a long way to go. Just under 50% of its total portfolio was in domestic bonds at the end of September, compared with its new target of 35%.


He declined to say whether it had already bought more stocks and foreign bonds. “I leave it up to you to imagine that,” he said.

Of course he will: after all the GPIF has more than filled its legal quotes of stock purchases by now. However, what he won’t leave to your imagination is what happens when this latest experiment in central planning fails:

“I have no doubt that the economy is in a recovery trend if you look at the long run,” GPIF President Takahiro Mitani said in an interview Friday.

Actually, no, it isn’t, unless you call a quadruple-dip recession a “recovery”.

Unfortunately, for Japan, and its tens of millions of pensioners, the only news here is simple: the entire country is now held hostage by Japan’s last-gasp attempt to prove Monetarist and Keynesian policies work. Because, said otherwise, “Abenomics better work, or else all your pensions are toast.

What happens when Abenomics inevitably fails, we leave to the civil war historians of the latter part of the 21st century.

via Zero Hedge Tyler Durden

Oil Won’t Trade This Low Forever… And The Chinese Know It!

Barrels Oil

As we all know, the oil price has plummeted to a level we haven’t seen in more than five years and this will obviously have severe consequences for both the USA and the Eurozone as major economies. At the current oil price, a lot of the shale gas oil and gas producers are nearing the territory where they become unprofitable and might have to shut down their operations. This means that a lower oil price is both a curse and a blessing for the States. A lot of people might lose their jobs if some higher cost wells will have to be abandoned but on the other hand the lower oil price might be beneficial to other sectors of the American industrial economy.

The Federal Reserve isn’t worried yet as it said that it expects the low oil price to indeed fuel the further recovery of the American economy as the input costs will go down. The central bank expects its citizens to spend the extra money they will have at the end of the month instead of saving it. That’s an interesting thought as we would be extremely surprised to see a 1 on 1 trade-off whereby the entire amount of energy savings will be used to increase the consumption pattern. Additionally, a lower oil price will reduce the inflation rate and that might be a side effect which wouldn’t make the Federal Reserve happy as it plans to increase the benchmark interest rates from next year on.

William Dudley NY Fed

William Dudley, NY Fed. Source

The Fed is also shrugging off the jobs problem stating that for now it doesn’t think the drop in the oil price will intensify and there won’t be a near-term reduction in oil and gas investment in the USA. This might be a very optimistic point of view as several companies need a higher oil price than $65 per barrel to be viable and we wouldn’t be surprised to see quite a few job cuts in 2015 if the current oil price persists.

The impact of the low oil price is much more positive for the Eurozone as all Eurozone countries are net importers of oil. However, one cannot ignore the currency exchange rate factor (see next image). The oil price might have dropped by 40% in US Dollar, but the fall in the oil price was much less when looking at the oil price in Euro as the US Dollar continued to strengthen versus the Euro. The cheaper oil will obviously influence the inflation rate as well, and this might very well be Mario Draghi’s worst nightmare as he’s desperately trying to get the inflation rate up to its desired level of 2%. However, the falling oil price will also boost the GDP of the Eurozone and according to preliminary estimates the current drop will add roughly 0.3-0.4% to the GDP in the first year after the lowered oil price and will add approximately 0.8% over the first three years.

Oil Price Chart


That’s obviously very encouraging as a higher economic growth rate might be much better for the public finances of the member states of the Eurozone as well as helping those countries to keep its Debt/GDP ratio under control. It looks like the Eurozone is gearing up for a positive perfect storm. A cheaper Euro will be good for the export of goods and services whilst the lower oil price will reduce the initial production cost of several export-related goods. If you throw the lower interest rates into the mix as well, you’d almost start to think the Eurozone might be ready to benefit tremendously from the low oil price.

Another country which is taking advantage of the oil price is China. The country has stated it wanted to more than double its strategic reserves of oil inside China, and we have heard several reports from inside the sector that China is effectively stepping up the plate and is buying huge amounts of crude oil at fire sale discounts. This is clearly visible in the charter rates of oil tankers which have increased exponentially.

Per Reuters Africa:

Average VLCC earnings on the Middle East-Japan route this
year are at the highest level since 2010, said Ralph
Leszczynski, head of research at Italian shipbroker Banchero

 “Average earnings on the Middle East-Asia route so far in
2014 are $22,000 per day, against $32,000 per day in 2010. But
this is still way better than the last three years,” he told
Reuters on Friday


There’s a binary outcome for the current oil price. Either you panic or you try to see the advantage and opportunity of the low-cost oil. China is taking advantage of the situation and even the inflation-minded currency blocks like the USA and the Eurozone are seeing the advantages. Just like a falling gold price, a dropping oil price could be something to take advantage of during the tax loss selling season.

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