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‘Bond Trading’ Exodus Reveals The Global Economy’s Landmine

Authored by Jeffrey Snider via Alhambra Investment Partners,

It isn’t just US or European banks which are shrinking. The nature of this post-August 9, 2007, world is just that – global. Sure, there are regulations which have made investment banking more expensive. But there isn’t a rule or law that Wall Street (really Lombard Street) wouldn’t “discover” a way to circumvent it if they all thought it was worth the trouble.

Bond trading, a euphemism for all this FICC money dealing stuff, didn’t need an LCR to look at the world differently. It only needed Bear Stearns.

There is only risk where there used to be only return. In an environment where everyone largely agrees (outside of a few outliers) with this returnless risk scenario there really is no other course. Being on the wrong end of such asymmetry leaves only the one long run option. You can fight it and disagree now and again, but that sort of reflationary thinking just cannot last.

Goldman Sachs earlier this year announced that it would be cutting back. This week, it was Nomura in Japan (thanks J. Fraser). Once that country’s biggest stalwart in “fixed income”, another way of saying bond trading, they don’t want to do it anymore, either.

The biggest question mark hovers over the cuts in fixed-income trading, often seen as a strength at the bank. Nomura is scaling back emerging markets and G-10 rates, foreign exchange and flow-credit trading businesses, as well as costs in the EMEA flow business by 50 percent. Flow trading occurs on behalf of clients, unlike proprietary trading.

The business just isn’t there for them to keep up with capacity. Why isn’t the business there? An unstable system destroys not just opportunity but also the incentives to try and stabilize the system. At this point, nothing other than outside influence will break the cycle (and that’s about as likely as a central banker recovery prediction paying off).

The Office of the Comptroller of the Currency (OCC) data on Q4 2018 was pretty damning as far as the domestic dealers are concerned. Goldman had an atrocious quarter, no surprise, almost certainly betting on Jay Powell. Money dealers are described in the Economics (and central bank) textbook running neutral books; they don’t, they never have.

You can see the ebbs and flows of particular dealers which follow along each reflation episode. Goldman, out of all of them, really bought into Reflation #3. Beginning with the first quarter of 2017, this bank’s derivative book skyrocketed an astounding 33% over the next five quarters! Apparently, they weren’t in much demand for compression trading during 2017’s globally synchronized growth scare, and boy did the world seem much better for it (CNY UP, too).

That trend, however, abruptly ended around Q1 2018. Not surprisingly, especially since it was the same trend for the other dealers, too, a lot of bad monetary things have been happening ever since.

These are the more visible pieces of that “rest of the money markets that do matter” I write about when they intrude upon federal funds, the trouble out there in the shadows which must be severe if it shows up in EFF and IOER (the joke). Since around Q1 2018, yep, intrude they have.

In Q4 when everything was going wrong, GS’s derivative book collapsed 22% during just those three months. Weeks later, the “bank” then announced how it didn’t want to do this stuff anymore. Having bet on Yellen, the bank’s withdrawal helped force her successor to his epic flip flop.

The other big banks reduced their exposures during Q4, too. Citigroup, which as late as 2014 right before Euro$ #3 was jockeying to overtake JPM as the money dealer king, ran for the hills in Q4 2018. Its book was whacked 13%. We know the global economy hit a landmine in this same October to December window.

Again, it’s not just US banks or those conflicted throughout Europe. This is a systemic problem all across the board, a point driven home by Japan’s Nomura. This derivative stuff, or bond trading and FICC, is the guts of the global money system – a credit-based currency regime. This eurodollar is the world’s reserve currency, its corrosive fingerprints once more all over the global economy.

And so, our problems at least are very well defined. You just can’t get anyone to believe it, the high intellectual hurdle which I described a few months ago:

This is one key factor as to why our economic problems are so hard to overcome; how in the world the global economy can lose an entire decade and be one-tenth of the way into another. You start by saying the central bank isn’t central and already people are at best skeptical if not completely turned off. And then you tell them, the few who are left, if you really want any chance at legitimate economic recovery Goldman Sachs [or Nomura] needs to make more money, a lot more, in its bond trading business. And if you don’t want Goldman [or Nomura] to thrive in FICC, then the whole global monetary system must be completely revamped from the ground up.

Oh, and by the way, we’ve been operating under a clandestine global monetary system predicated on the world’s biggest banks who aren’t really banks working in the shadows for half a century already.

It’s way, way too much to grasp, especially all at once.

Real economy participants don’t care one way or the other about formal definitions.

They’re stuck with what’s actually available, or not available. The consequences are real, too.

via ZeroHedge News http://bit.ly/2KhMfgt Tyler Durden

Four ways that Uncle Sam will respond to its $75 trillion insolvency

Last week I told you that the US government recently reported a negative net worth of MINUS $75 TRILLION.

That’s not a type-o. According to the Treasury Department’s annual financial report for Fiscal Year 2018 (which they just published last week), the US government is hopelessly bankrupt.

Now, I’m not talking about this trying to stoke fear and panic.

Quite the opposite– I’m hoping that this conversation results in calm optimism. But the point is that it’s an important conversation to have… because a number as large as $75 trillion absolutely has consequences.

To believe that any nation can be so desperately insolvent without suffering any negative impact is just plain foolish.

Debts have to be paid. Obligations have to be met. So at some point, with numbers these gruesome, something has to break down.

This is not a dire prediction or wild conspiracy theory. It’s an arithmetic certainty.

Remember, this isn’t even my analysis. The government itself acknowledges its $75 trillion insolvency. The Social Security Administration acknowledges that its trust funds will run out of money in 15 years.

This is happening. So let’s take a look at the government’s very narrow playbook:

1) Ignore the problem

Politicians are already acting as if nothing is wrong.

Sure, occasionally you’ll hear someone complain about the debt, or there will be a debt ceiling showdown. But no serious alarm bells are ringing.

And because they don’t make a big deal over the debt, no one else does either. Everyone just goes along as if there’s not a problem.

2) Raise taxes

This is HIGHLY likely because it’s the most politically palatable option. The Bolsheviks are already coming to power under a mandate to soak the rich. They want wealth taxes, dramatically higher income taxes, corporate taxes, surtaxes, etc.

Problem is– it won’t help.

Since the end of World War II, tax rates in the United States have been all over the board. Back in the 1960s, the wealthiest paid a highest marginal rate of 90%! Now the highest is 37%.

During that period, corporate, individual, and capital gain rates have bounced around like a drunken pinball.

Yet throughout it all, despite how high or low tax rates have been set, overall tax REVENUE (measured as a percentage of GDP) has been more or less the same.

US tax revenue averages out to be about 17.7% of GDP, year in, year out, regardless of what actual tax rates are.

In other words, the US government’s ‘slice’ of the economic pie is about 17.7%, plus/minus a very narrow range.

In Fiscal Year 2018, for example, the federal government’s tax revenue was 18.0% of GDP.

Point is, they could jack up tax rates to the moon… but actual tax REVENUE won’t budge at all.

You’d think that they would recognize this– that eight decades of tax data would make them think– “Gee, if we can’t increase our slice of the pie, why don’t we just try to make the pie bigger…”

But no. They fall back on the same old ‘soak the rich’ mentality, because it gets them elected.

3) Default

Since raising taxes won’t actually fix anything, their next move is to default.

This could mean either defaulting on their creditors, i.e. people who own the debt… or defaulting on their obligations to taxpayers (like Social Security).

And as I said earlier, that’s already happening.

In 2018 annual report, the Social Security Administration stated that its trust funds will run out of money in 2034, just 15 years away.

After that, they’ll have no choice but to dramatically cut benefits for current and future Social Security recipients.

Imagine paying into the system for your entire life under a promise that you’ll receive certain benefits, only to have that promise broken. That constitutes a default. And it’s already in the works.

Defaulting on creditors is a tricky one.

The top owners of US debt are as follows:

  • Social Security Administration: yes it’s true, Social Security is the top US debt holder. So if Uncle Sam defaults on Social Security, that program is even more royally screwed.
  • Federal Reserve: The Fed owns trillions of dollars worth of US debt. So if Uncle Sam defaults, it would wipe out the Fed’s solvency and create an epic currency crisis for the US dollar.
  • Foreign Creditors like China: If the Fed defaults on the Chinese, it would create a global financial crisis, as nearly all foreigners would dump their US bonds. Borrowing costs would skyrocket as a result, bankrupting the government.

None of those is a good option, which leads to…

4) Inflation

For thousands of years, governments in financial distress resorted to debasing their currencies and creating inflation in order to make ends meet.

Governments really like inflation, because it slowly reduces the value of the debt that they’ve borrowed.

And because inflation is so gradual (around 3% annually), no one kicks up much of a fuss, even though it steals prosperity year after year.

So most likely they’ll continue to print money in an attempt to create inflation and inflate the debt away.

These are all things that a reasonable person should plan on: higher taxes, higher inflation, default on Social Security, etc.

And again, this is based on the government’s own data.

But it’s not anything to fear– there are plenty of solutions.

It certainly makes sense, for example, to consider owning some inflation-proof assets: gold and silver, real estate (including foreign property), shares of a well-managed, high cash-flow business, etc.

Those assets will do well against inflation.

It also makes sense to create a robust retirement structure like a solo 401(k) or SEP IRA so that you’re not as dependent on Social Security… because that reckoning day is absolutely coming.

The government is practically giving us a date to circle on our calendars. Failing to plan for it is insane.

Source

from Sovereign Man http://bit.ly/2P0bd2D
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Top House Republican Shreds Nadler For Bullying Barr; Wants Mueller To Testify “Immediately”

Rep. Doug Collins, the top Republican on the Democrat-controlled House Judiciary Committee, wrote a scathing letter to the panel’s chairman, Rep. Jerry Nadler (D-NY) accusing him of putting Attorney General William Barr in an “untenable but politically convenient situation.” 

According to the letter, Barr would be forced to “break the law” if he complies with a subpoena for special counsel Robert Mueller’s unredacted Russia report and its underlying evidence. If Barr doesn’t, Nadler will “label him as part of a cover-up,” according to the letter. 

Barr has vowed to release a version of Mueller’s Russia report by the middle of April, with redactions made to grand jury and classified information, – as required under federal law. 

House Democrats voted last Wednesday to authorize subpoenas for Mueller’s report and its underlying evidence with no redactions. 

Collins notes that Nadler could compel AG Barr to provide the unredacted report if he launches an impeachment hearing, however the top Republican on the panel noted “Perhaps you are loath to begin an impeachment hearing when the facts do not support one.” 

“Instead, you refuse to head down that path for political reasons, and have chosen the path of greatest resistance, and least legality – attacking the Attorney General for refusing to break the law while misleading the American public about what the law requires or allows.” 

“Your decision to make groundless claims and repeatedly threaten to go to court not only distracts from other Committee business but, based on firm legal precedent, will also end — after months, if not years, of litigation.” 

Collins suggests that if Nadler isn’t going to launch an impeachment hearing, he invite Mueller to testify “immediately.”

“For nearly two years, Special Counsel Mueller oversaw an investigation that issued more than 2.800 subpoenas, executed nearly 500 search warrants, and interviewed approximately 500 witnesses. Attorney General Barr was never part of this investigation, and instead simply reviewed the Special Counsel’s final report and has provided Congress, so far, with the Special Counsel’s principal conclusions.” 

 “I urge you to do the right thing, follow the law, and invite the Special Counsel to testify before the Committee immediately. Doing so ensures we will hear the unfiltered truth from a man who conducted his investigation with integrity and professionalism.” 

via ZeroHedge News http://bit.ly/2uUuycw Tyler Durden

Parents Charged In College Admissions Scam Now Hiring “Prison Life Consultants”

In news that should surprise no one, affluent Hollywood elites are scared shitless of going jail, but they have every intention of doing so fully prepared for the experience.

The parents once seeking “consultation” on the easy way to get their kids into elite universities are now seeking another type of consultation: what prison life could be like. 

As a result of the “largest college admissions scandal in history”, actresses Lori Loughlin and Felicity Huffman were among 15 other parents and celebs who appeared before a judge last Wednesday afternoon, accused of cheating to get their kids into elite universities like USC and Yale. Most defendants have remained mum on their legal strategies as they head to “face the music” as a result of their involvement in the scheme. 

Some parents are considering plea deals, while others are seeking out consultants to help them with advice on what prison life could be life. Parents are seeking advice from a former convicted felon, Justin Paperny, who now works as a “prison consultant”. He recently told CBS that he had been hired by one parent charged in the scheme, while he is “in talks” with others. 

He said: “They’re scared and it’s ‘Can I survive in prison? Am I cut out for prison?’ What’s most surprising to me about the first conversation is how many of them didn’t view their actions as criminal.”

Paperny recounts parents asking additional questions like: “”What’s it like? What will my job be? Can my family visit? Is there email? Is there internet?” He has said the more important conversations he’s been having with his “clients” have been about accepting responsibility, which can lead to a lighter sentence. 

What is his sage-like advice, that frightened parents are probably paying tens of thousands of dollars for?

“I would encourage defendants, any defendants, if they broke the law to own it, to acknowledge it, to run not walk towards taking a plea agreement. Those that respond more appropriately should get better prison sentences.”

We have been following the admissions scandal at length. We recently wrote about how financial speaking gigs and elite high schools helped facilitate the scam for years. 

As a result of the scandal, UCLA’s Men’s Soccer Coach and former U.S. Men’s national team player Jorge Salcedo recently resigned from his position at the university. We also wrote about how students were being encouraged to fake learning disabilities in order to cheat on college entrance exams. 

We also profiled one Harvard test-taking “whiz” that was responsible for helping students at the center of the scandal get high scores on admissions tests. Prior to that, we reported on the tipster who gave the SEC the lead on the admissions scandal. He was in the midst of being investigated for a pump and dump scam at the time. 

We reported last month that the universities involved were facing class action lawsuits from their students. Additionally, we reported on major tax implications that could be waiting for the parents involved – including potential civil tax fraud penalties and interest charges on any bribe amounts they wrote off. 

Finally, after the scandal was reported, we unveiled that William Rick Singer was the man who brokered and facilitated many of the bribes. 

Our original take on the entire scandal can be read here. 

via ZeroHedge News http://bit.ly/2I3Hk0Z Tyler Durden

The Wedge…

Authored by Sven Henrich via NorthmanTrader.com,

We don’t need no intervention
We don’t need no market control
No dark sarcasm in the trading room
Hey, central bankers, leave them markets alone
All in all it’s just another wedge in the wall

My apologies to Pink Floyd, but man, can’t they just leave markets alone?

The answer is a resounding no. I’ve written about it plenty of times including this weekend in Theater of the Absurd, but the 100% reliance of markets on dovish central bankers should be obvious to everyone by now. No new highs anywhere without dovish central bankers. 10 years after the financial crisis this remains the one trick pony markets rely upon. And don’t expect it to change. This year’s global renewed dovish groveling by central bankers has once again revealed that markets just can’t do without and already we see political pressure in the US to push for a cut in rates in the re-introduction of QE. And while we’re at it, why not argue for the ECB to buy stocks? The BOJ does it, the SNB does it, why not the ECB, why not the Fed? We’re not there yet, but does anyone really doubt that this is where we are all heading when the next swoon unfolds? After all the ammunition available this time around is much less plentiful as nobody has been able to normalize during this cycle. What’s it say about the actual foundation of our market system if it simply can’t function without accommodative central bankers. 10 years after the financial crisis no less.

But no matter for now, central banks, and greatly aided by a torrent of buybacks, have once again succeeded in making markets levitate relentlessly higher, fundamentals be damned. And once again bulls take credit and comfort in having been bailed out again. One trick ponies.

But is it all an illusion setting up for the next “punch” as I asked this morning on CNBC? During the interview I outlined a specific pattern, that of a rising wedge on $NDX, a pattern eerily similar to what we saw unfold last summer:

As we saw last summer these patterns can keep going until they break, but note even last summer’s break still managed to squeeze out new highs first before really falling apart. But nevertheless the energy released can be awesome as we all saw culminating in that 20% market drop.

If you’re not familiar with the concept of a rising wedge pattern here’s the classic structure as outlined by Investopedia:

And this is precisely what happened last year. Textbook. Here’s the updated $NDX chart as of this morning, showing last year’s structure and the current setup:

It is perhaps ironic, but also telling, that last year the wedge broke as the Fed transitioned after 10 years of “accommodative” to non accommodative with a view to keep raising rates and a balance sheet roll-off on autopilot. This new wedge nw having arisen from the depths of the Fed’s capitulation and going back to accommodative. Well, they tried for 3 months and it blew up in their face.

This new wedge here, coming from massive oversold conditions in December now is steeper and more narrow. Sustainable? Hardly. It will break at some point. Will it have the same reaction as last year? Hard to say. After all central bankers are back in accommodative mode and remain in control for now. But clearly $NDX has some open gaps to fill and some retesting to do, but until this wedge breaks it can also go higher and even new highs could be squeezed out of this, but note once again a negative divergence on new highs. It doesn’t matter until it does. For now nothing matters. Again.

Hey, central bankers, leave them markets alone.
All in all it’s just another wedge in the wall.

*  *  *

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

via ZeroHedge News http://bit.ly/2YZgaNZ Tyler Durden

Iran Designates US Military As Terrorist Organization

Just hours after President Trump formally designated Iran’s Islamic Revolutionary Guards Corps as a terrorist organization, Iran’s foreign ministry has put forward a bill placing US Central Command on a list of organizations designated as terrorists, akin to Daesh.

Statement from the President on the Designation of the Islamic Revolutionary Guard Corps as a Foreign Terrorist Organization

Today, I am formally announcing my Administration’s plan to designate Iran’s Islamic Revolutionary Guard Corps (IRGC), including its Qods Force, as a Foreign Terrorist Organization (FTO) under Section 219 of the Immigration and Nationality Act.  This unprecedented step, led by the Department of State, recognizes the reality that Iran is not only a State Sponsor of Terrorism, but that the IRGC actively participates in, finances, and promotes terrorism as a tool of statecraft.  The IRGC is the Iranian government’s primary means of directing and implementing its global terrorist campaign.

This designation will be the first time that the United States has ever named a part of another government as a FTO.  It underscores the fact that Iran’s actions are fundamentally different from those of other governments.  This action will significantly expand the scope and scale of our maximum pressure on the Iranian regime.  It makes crystal clear the risks of conducting business with, or providing support to, the IRGC.  If you are doing business with the IRGC, you will be bankrolling terrorism.

This action sends a clear message to Tehran that its support for terrorism has serious consequences.  We will continue to increase financial pressure and raise the costs on the Iranian regime for its support of terrorist activity until it abandons its malign and outlaw behavior.

But, as Sputnik News reports, the Iranian Foreign Ministry responded to the designation on Monday, recommending that President Hassan Rouhani designate US Central Command (US CENTCOM), a US military theatre-level command whose area of responsibility includes the Middle East, on the list of organisations designated as terrorists by Iran.

Previously, the Iranian Foreign Minister noted that those US officials who advocated IRGC blacklisting, “seek to drag the US into a quagmire”.

“#NetanyahuFirsters who have long agitated for FTO (Foreign Terrorist Organisation) of the IRGC fully understand its consequences for US forces in the region. In fact, they seek to drag the US into a quagmire on his behalf,” Mohammed Javad Zarif said on his Twitter account. “@realDonaldTrump should know better than to be conned into another US disaster.”

Iranian officials previously warned that the IRGC’s inclusion on the US terror list would be a “mistake” which would prompt Tehran to equate the US military with Daesh (ISIS). Heshmatollah Falahatpisheh, chairman of the Iranian parliament’s National Security and Foreign Policy Commission, said a bill to this effect had already been prepared.

via ZeroHedge News http://bit.ly/2WVcXNA Tyler Durden

Alec Baldwin Flirts With Presidential Run, Says Beating Trump Would Be “So Easy”

Alec Baldwin, the actor who is well known today for his widely ridiculed impersonation of President Trump, as well as his violent temper, is now considering a run for president.

In a Monday morning tweet, Baldwin asked his followers if they would vote for him if he decided to run for president, adding that beating President Trump would be “so easy.”

Baldwin

Then again, he wouldn’t be the first candidate to take that view.

Baldwin added that he wouldn’t ask for any money (suggesting that he would self-finance his campaign), and that “I promise I will win.” Of course, the actor has no political or government experience to speak of (unless you count his portrayal of CIA director Alan Hunley in the ‘Mission Impossible’ movies), and it’s not clear exactly what his policy platform would be, aside from ‘Trump bad.’

Baldwin sarcastically added that his tweets saved him “millions” in polling.

This isn’t the first time Baldwin has boasted about beating Trump in an election, as the Hill points out. The 61-year-old actor told Howard Stern during an interview last year that “If I ran, I would win.”

“I would absolutely win,” Baldwin said, adding that it would be “the funniest, most exciting, most crazy campaign.”

He also once flirted with running for mayor of New York City back in 2011.

Trump has mocked Baldwin for his terrible impression of the president, once tweeting that the actor’s “dying mediocre career” was saved by the SNL gig.

Of course, with the Democratic field already so crowded, would Baldwin try and seek the nomination? Or would he simply pull a Howard Schultz and explore running as an independent?

Either way, we look forward to Baldwin continuing to flirt with a presidential run over the next few months.

via ZeroHedge News http://bit.ly/2VDxe9S Tyler Durden

Europe’s Right-Wing Populists Unite Behind Salvini Ahead Of EU Elections

With EU elections just around the corner, Europe’s conservative populist parties announced a new alliance Monday with the goal of becoming the strongest faction in the European Parliament, while seeking to radically influence EU policies on security, migration, family values and the environment, according to Euro News. 

From left, Olli Kotro, leader of The Finns Party, Jörg Meuthen, leader of Alternative For Germany party, Matteo Salvini, Italian deputy-Premier and leader of the League party, and Anders Vistisen, leader of the Danish People’s Party

“The news is that we are broadening the community, the family. We are working for a new European dream today. For many Europeans, the EU (European Union) is a nightmare,” Italian Deputy Prime Minister Matteo Salvini told reporters following a meeting of Europe’s far-right party leaders met in Milan on Monday. Salvini is spearheading the alliance, called “Towards a Europe of Common Sense,” which he says he hopes will “win and change Europe.” 

Salvini was joined Monday by the far-right Alternative for Germany’s co-leader Joerg Meuthen, Olli Kotro of the euroskeptic populist party The Finns, and Anders Vistisen of the right-wing, populist Danish People’s Party. Those parties now come from other parliamentary groups, the European Conservatives and Reformists (ECR) and the Europe of Freedom and Direct Democracy (EFDD). –AP

The alliance hopes to form a majority bloc following the May 23-26 elections – “the most numerous, important, determined and forward-looking group,” according to Salvini. 

“We are not aiming to lose or just participate. Our goal is to win and change the rules of Europe.” 

Europe’s right-wing populist parties are currently divided into three groups: The Europe of Nations and Freedom (ENF) group — which includes Italy’s the League, France’s National Rally, Austria’s Freedom Party and the Netherlands’ Party for Freedom — the European Conservatives and Reformists (ECR), which groups the Danish People’s Party and the Finns Party among others, and the Europe of Freedom and Direct Democracy (EFDD), which has the Alternative for Germany (AfD) and the UK’s Brexit Party . –Euro News

The group’s top priorities are a halt to all clandestine migration, restoring political sovereignty to EU nations, protecting “European culture,” and stronger European borders – while the #1 threat to Europe is Islamic extremism. 

“As interior minister for 10 months, the No. 1 risk in Italy and Europe is Islamic extremism, Islamic fanaticism, Islamic terrorism,” said Salvini. “There are extreme-right and extreme-left minorities in Italy and in Europe, (but) they fortunately are controlled and of limited numbers.”

Salvini rejected the notion that the groups are filled with political extremists bent on totalitarian rule. 

“Today at this table there are no nostalgic extremists,” he said, adding: “The only nostalgics are in power in Brussels. Today, we look ahead with a clear memory of what happened in the past, but the tired debate of right, left, fascist, communist, is not what makes us passionate.”

Political experts say the May 23-26 European Parliament vote could prove to be a tipping point in post-war European politics, if traditional political powerhouses lose support and extremist, populist parties gain more clout.

The vote, which involves 705 seats this year, is run as national ballots in each of the bloc’s states. National political parties with common ideology then unite in EU-wide groups, like the center-right EPP, the center-left S&D Socialists or the liberal, pro-business ALDE.

The new euroskeptic alliance, launched under the banner “Toward a Europe of common sense,” expands on the parliament’s four-year-old Europe of Nations and Freedom Group (ENF), which already includes France’s far-right National Rally, Austria’s Freedom Party and the Netherland’s Party for Freedom. –AP

The alliance, which is holding a rally on May 18 in Milan’s central Piazza Duomo, says their invitation is open to all like-minded parties who wish to join the faction. If they win a majority in the EU elections, the group would cancel for good the process of inviting Turkey to become a member of the European Union – a process which has been stalled for years.

via ZeroHedge News http://bit.ly/2WT7834 Tyler Durden

Is Assange A Journalist?

Authored by Caitlin Johnstone via CaitlinJohnstone.com,

As we discussed yesterday, whenever Assange is in the news and people are defending him you always see a bunch of hyper-emotional empire loyalists running around online trying to manage the narrative about him.

One of the most common talking points which comes up is that Assange is “not a journalist”.

The reason this talking point comes up, of course, is because the WikiLeaks founder is besieged by powerful forces who are attempting to imprison him for publishing inconvenient facts about them, and his defenders often voice their concerns about what this means for the future of press freedoms. The completely baseless claim that Assange is “not a journalist” is used in an attempt to defuse the argument that his prosecution by the US government could lead to the same fate for any news media outlet which publishes leaks on the US government anywhere in the world. If he’s not a journalist, then his prosecution sets no precedent for real journalists.

This argument, if you can call it that, is fallacious for a number of reasons. For starters, as The Intercept‘s Glenn Greenwald explained last year, there’s not any legal distinction in the US Constitution between news media outlets like the New York Times and an outlet which solely focuses on publishing leaks. If you set the precedent with any publisher, you’re necessarily setting it for all of them. Greenwald writes the following:

To begin with, the press freedom guarantee of the First Amendment isn’t confined to “legitimate news outlets” – whatever that might mean. The First Amendment isn’t available only to a certain class of people licensed as “journalists.” It protects not a privileged group of people called “professional journalists” but rather an activity: namely, using the press (which at the time of the First Amendment’s enactment meant the literal printing press) to inform the public about what the government was doing. Everyone is entitled to that constitutional protection equally: there is no cogent way to justify why the Guardian, ex-DOJ-officials-turned-bloggers, or Marcy Wheeler are free to publish classified information but Julian Assange and WikiLeaks are not.

Secondly, anyone with a functioning brain can see that Julian Assange is indeed a journalist. Publishing facts so that the citizenry can inform themselves about what’s going on in their world and what’s happening with their government is the thing that journalism is. Duh. The need for an informed citizenry is the entire reason why press freedoms are protected so explicitly under the US Constitution, and publishing facts about the most powerful institutions on earth indisputably does create a more informed citizenry.

You can look at any conventional dictionary definition of the word and come to the same conclusion. Merriam-Webster offers “the public press” and “the collection and editing of news for presentation through the media”. The Oxford English Dictionary offers “The activity or profession of writing for newspapers, magazines, or news websites or preparing news to be broadcast.” Your Dictionary offers” the work of finding, creating, editing and publishing news, or material written and presented for a newspaper, magazine or broadcast news source.” These are activities that WikiLeaks is undeniably involved in; they collect and publish newsworthy information to be circulated by themselves and other news sources. The fact that they do their part differently (and better) than other outlets doesn’t change that.

Which explains why the WikiLeaks team has racked up numerous awards for journalism over the years, including the Walkley Award for Most Outstanding Contribution to Journalism (2011), the Martha Gellhorn Prize for Journalism (2011), the International Piero Passetti Journalism Prize of the National Union of Italian Journalists (2011), the Jose Couso Press Freedom Award (2011), the Brazillian Press Association Human Rights Award (2013), and the Kazakstan Union of Journalists Top Prize (2014).

The claim that Assange is “not a journalist” is both an irrelevant red herring and a self-evident falsehood. It is made not by people with an interest in maintaining a small and specific linguistic understanding of what the word journalism means, but by people who want to see Julian Assange imprisoned by the same government which tortured Chelsea Manning because he made them feel emotionally upset. It’s a fact-free argument made entirely in bad faith for inexcusable motives: the desire to see a journalist imprisoned for telling the truth.

When someone says “Assange isn’t a journalist”, they aren’t telling you what Assange is. They’re showing you what they are.

*  * *

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via ZeroHedge News http://bit.ly/2IlS8H4 Tyler Durden

JPMorgan: The Business Cycle No Longer Exists As Central Bank Have Taken Over

The amount of mental acrobatics that Wall Street analysts have to perform to justify continued buying of stocks even as bonds scream deflation, the yield curve screams contraction, Europe and China are already one foot in a recession, and earnings are set for their first profit contraction in 3 years, is simply staggering.

One week ago, we reported that in keeping with its now traditional “good quant, bad quant” strategy (profiled most recently here), just hours later, JPMorgan’s “other” quant, Nikolaos Panigirtzoglou published a report in which he said that while he maintains a risk-on and pro-cyclical stance (the alternative is risking being dubbed “fake news” by Kolanovic), he warned that “investors should start building up hedges against the risk of a repeat of the past two weeks’ yield curve inversion episode.”

Picking up on what he said two weeks ago, the JPMorgan strategist noted that “yield curve inversion has been generally a bad omen for growth and recession risk, though with variable lags to risky asset prices historically.” And while not news to those who read our latest recap of Panigirtzoglou recent report, at the macro level the “other” JPM quant warns that “despite the improvement in the Chinese and Asian PMIs in this week’s releases the global growth picture is not out of the woods yet” adding that “these cyclical risks are still manifesting in our global manufacturing PMI, which has failed to rise in the latest release despite better Asian PMIs”.

Then over the weekend, in order to dispel fears that stocks have levitated too high, one strategist came out with a “novel” interpretation, claiming that there is no reason to worry as, drumroll, equity investors have been worried about the wrong yield curve. That strategist: Mislav Matejka who works for JPMorgan, and is a co-worker of the far more skeptical Panigirtzoglou.

That’s right, one bank, two diametrically opposing takes on what the yield curve means for investors.

According to the “other” JPM strategist, while there’s concern that the recent inversion of the yield curve is a sell signal for the market, he notes there’s an average 18-month lag between such a move and the onset of a recession, Matejka said in a note to investors Monday.

His solution? Ignore the “bad omen” for stocks highlighted by JPMorgan’s Panigirtzoglou, and inatead please just look at the spread between the 10-year and 2-year Treasury yields – which is about 18 basis points away from inversion – instead of using the inverted 10-year and 3-month Treasury yield difference that has stock traders – and his own JPMorgan co-worker – on edge.

But while disagreements between different strategists at the same bank is hardly new, what is remarkable is what a third – and even more bullish – JPMorgan strategist told Barron’s to further stoke the bullish narrative.

In order to justify JPMorgan’s 3,000 price target in the S&P, in an interview with Barron‘s, the bank’s chief U.S. equity strategist Dubravko Lakos-Bujas said that while many strategists and investors try to predict the end of the business current cycle, he boldly claimed that it may be time to reconsider its very existence.

That’s right: with the US poised to enter its longest expansion on record in June (absent a recession in the next month or so, which looks unlikely except in retrospect) and with rising concerns that the economy is now extremely “late cycle”, JPMorgan’s solution is to ignore the business cycle entirely, as central banks have now effectively taken over micromanaging the global economy.

“We are all used to using the word ‘cycle’; we’re all used to looking at historical charts and graphs and equations and relationships,” Lakos-Bujas told Barron’s. “The reality is that maybe the word ‘cycle’ is no longer even relevant, given that we have so much unconventional central-bank involvement.”

Why does the JPM chief equity strategist feel comfortable with making such a ludicrous statement? It has everything to do with the lack of inflation (because on Wall Street, as well as in the Federal Reserve HQ, there is no such thing as surging housing, healthcare, education and food prices and all the focus is on deflating, and edible, iPads).

“The fact that we’re not seeing really significant inflation pressure—it remains positive but tame—suggests that there’s no reason for central-bank policy to rush,” he said, pitching central planning with the passion and fervor of a Communist Party undersecretary speaking in front of Leonid Brezhnev in 1968 Moscow.

Of course, as Barron’s noted, central banks have done more than just keep rates low: central banks have put their balance sheets to work like never before, with large-scale asset purchases injecting liquidity into economies around the world. The ECB has gone even further than the Fed, buying up both sovereign and corporate bonds. The Bank of Japan took it to yet another level, purchasing equities in addition to bonds; its balance sheet is now above 100% of Japan’s GDP.

“This is not a normal cycle just left to itself to run. It is continually fiddled with by these central-bank injections,” he says, as if that were a good thing. And apparently it is, because the positive spin on the entire world becoming a 1960s version of the USSR is that “rather than nearing the end of one decadelong cycle, perhaps it’s just the beginning of a fourth mini-cycle.”

The first cycle he identifies ran from 2009 to 2012, when the European debt crisis forced the ECB to be creative in its measures to support debt-burdened euro-zone economies. The next phase lasted until 2016, when some emerging markets slipped into recession and U.S. corporate profits declined for two quarters. It ended when the Fed paused interest-rate increases and other central banks turned more accommodative. Another mini-cycle ended in the fourth quarter of 2018, when the Fed pivoted to a dovish stance and China began fiscal stimulus.

That brings us to the start of 2019, when a fourth cycle might have begun. “We have these little mini-cycles that are continuously occurring, and they seem to coincide with central-bank policy,” Lakos-Bujas says.

Unlike his more bearish JPM colleague, Panagirtzoglou who has been skeptical for the better part of the past 4 months, Lakos-Bujas – just like Marko Kolanovic – sees the S&P 500 going to 3000 this year, as investors steadily become willing to take on more risk and overhangs like the U.S.-China trade dispute are resolved.

Perhaps there is something about Croatian genes predisposing analysts (Kolanovic, Matejka, Lakos-Bujas) to be especially bullish: we don’t know and it doesn’t really matter. But what struck us, is the lack of any critical observation or rational analysis of the dangers of central banks constantly stepping in to push stocks higher at any downside inflection points, something Bank of America pointed out over a year ago.

After all, in a world in which the economy is increasingly the market (where easy central banks and record buybacks are all that matter), all that is happening is that this increasingly artificial “market” is creating a world with record “zombie companies”, and staggering economic imbalances whose day of reckoning is not being resolved but merely delayed, guaranteeing that when the market finally does crack, not only will what little central bank credibility is left be crushed, but the world will fall into a depression the likes of which will make the 1920s and 1930s seems like a walk in the park.

via ZeroHedge News http://bit.ly/2Ki7zm8 Tyler Durden