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Authored by Kevin Muir via The Macro Tourist blog,

Wild day in the markets.

Emerging markets are getting crushed like a 1980s teenage nerd asking the head cheerleader to prom. As I write this, the EEM ETF is down roughly 3% on the day, and down more than 7% over the past week.

We’re past some simple mid-summer-illiquid shenanigans and definitely into the biting-on-the-pillow stage.

So what’s going on?

Well, some might blame EM market weakness on the debacle in Turkey, and although I am sure that’s not helping the situation, Turkey is a symptom – not the cause of recent EM problems.

Understanding how we got here

To understand what’s happening, we need to back up to the 2008 Great Financial Crisis. Back then the U.S. was the epicentre of the problems. Although the rest of the world wasn’t immune to the real estate madness, there can be no denying where it originated. America was patient zero. When the virus started spreading, faced with a financial system that was about to grind to a halt, the Federal Reserve embarked on a massive liquidity pump that flooded global financial markets with an unprecedented amount of US dollars.

It’s quaint to think about this now, but there was a time when emerging markets were complaining about the tremendous amount of US dollars sloshing around. In 2010, Brazil’s Finance Minister, Guido Mantega, scolded the United States and other countries who were “competitively devaluing” their currency through excessive liquidity injections.

At the time, the Brazilian Real was rising to levels that caused considerable economic pain for the Brazilian economy and they desperately wanted the US to ease up on the monetary accelerator.

There was all sorts of talk by finance ministers about the developed nations “currency war” on emerging markets.

The reality is that it wasn’t a “currency war”, but rather a realization that desperate nations do desperate things when they are in trouble. The United States, and many of the other developed nations, had blown a massive real estate bubble, and when it collapsed, they force-fed liquidity into the global financial system to stop the contagion from spreading.

Emerging markets were collateral damage to their policies. And the developed nations did not care. Not even one little bit.

Yet instead of complaining, maybe the Brazilians (and all the other emerging market countries) should have taken the opportunity to sell Reals and buy as many US dollars as the market would let them.

You know that saying, “better watch what you ask for? Because you might get it – good and hard!”

Well, that line was written for the Brazilian finance minister. After he complained about the too-strong-Real, the next eight years saw the Real collapse from 1.50 to almost 4. A nice big stack of USD FX reserves sure would be helpful right now.

But the Brazilian Central Bank didn’t hit the bid when they could, and now Brazil is suffering from the same problem that far too many emerging market economies are grappling with – severe capital outflows.

Why the sudden panic out of emerging markets?

It’s actually really easy to explain. It’s the exact same situation as 2010 – only in reverse. While in 2010 emerging market countries were complaining about too much US dollar liquidity, today there is nowhere near enough.

I thought they would have learned their lesson

I must admit to being late to this story. I had thought all of these EM bears were overplaying the importance of US dollar liquidity. After all, surely the emerging market countries would have learned their lesson from the 1998 Asian crisis. Back then many of these countries had borrowed extensively in US dollars, and when their currencies started collapsing, their liabilities shot up in real terms through the roof – making a bad situation all the worse. No way, they would make the same mistake again…

Wrong!

In fact, not only was my gut reaction incorrect, but I have misjudged the extent of US dollar borrowing so badly, it’s embarrassing.

In a recent BIS working paper, Gauging procyclicality and financial vulnerability in Asia, the authors highlight the absolute stunning amount of US dollar borrowing by EM entities over the past decade:

What a boneheaded move! No other way to describe it.

When the US got themselves into problems in 2008, they flooded the world with liquidity. Instead of saying “no thanks – we have seen this movie before”, emerging markets gulped it down in record amounts in what could be one of the dumbest financial moves in decades.

So that leaves us with the question of where go from here?

Does the large US dollar borrowing cause the US dollar to rally even more?

Although the last month of EM FX weakness has hurt, it’s actually a much longer-term story as the currencies have been falling steadily over the past eight years.

The JP Morgan Emerging Market FX Index is down almost 40% during this period.

Imagine writing what you think is a cheap loan, but only having to pay it back in another currency whose value rallies year after year.

That’s what’s happening. So although a weaker currency might be beneficial for EM economies, their liabilities are rising at a fierce rate as their currencies collapse. Combine that with the fact that US dollar liquidity – which used to be so abundant – is now shrinking making it more and more difficult to roll the borrowing, makes for a nightmare scenario. Then for the final kick in the pants, Trump is raising tariffs on products making it almost impossible for the EM economies to bounce by selling to what used to be the best consumer out there – Americans.

Who cries Uncle first?

All of this explains how we got here, but does not help with portfolio allocation decisions. Does it get worse or better from here? Should you dump EM and buy America?

I am not sure. It all depends on how long until the Fed ends their tightening campaign.

Trump does not want a strong US dollar. He also doesn’t want higher interest rates. If it was up to him, I suspect he would put rates down, print like mad, and institute tons of import duties on foreign goods.

But he does not control monetary policy, so as he pushes down on the fiscal accelerator and also engages in inflationary tariff battles, the Fed’s natural reaction is to tighten even more aggressively. Yet all of this causes the negative feedback loop of a higher-US-dollar-lower-EM-asset-prices to gain steam. Eventually, the Federal Reserve’s withdrawing of monetary stimulus will cause the global economy to tip over into a recession.

So the real question is when does the Fed blink?

I don’t know. My guess is that it is later rather than sooner, but we are definitely getting closer with days like today.

There is only so much pain that the global economy can take from tighter Federal Reserve policy. The American dollar is still the world’s reserve currency and it’s clear that the first participant without a place to sit in this game of musical chairs is emerging markets. The next time the music stops it might be an asset class that hits much closer to home and causes Powell & Co. to re-evaluate policy.

When the Fed does in fact slow down the tightening, buy EM hand-over-fist. It’s cheap. But someone tell them to stop borrowing in another currency. When will they ever learn?

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A Sacramento police investigation is underway after a Trump supporter alleged he was severely beaten by the lead singer of the well-known punk rock band Social Distortion at one of their concerts. 

Trump supporter Tim Hildebrand of Galt, California says that when 56-year-old band lead singer Mike Ness went on an anti-Trump rant while performing at the the Ace of Spades club in Midtown Sacramento, the concert attendee responded with a middle finger, and the chaos started from there.

“I stood pretty much with my silent protest with my middle finger up for the next two songs,” Hildebrand told reporters, saying he came to hear music, not a political speech. “I pretty much said I paid for your music, not your politics,” he said.

Cellphone video taken at the early August concert captured the moment the fan says he was brutally beaten when the group’s frontman took off his guitar mid-set, jumped into the audience below the stage and began punching the Trump supporter in the face. 

Cell phone video of the incident…

Cell phone video footage shows the altercation beginning as Ness spits on the fan from the stage, reportedly in response to the latter’s protesting the band’s anti-Trump statements by raising his middle finger toward the stage.

Hildebrand, who looks to be in his late 30’s or early 40’s described: Lead singer Mike Ness “takes his guitar off, jumps off the stage and proceeds to punch me multiple times in the head.”

The fan is moving forward with charges, and though an official statement from the band wasn’t immediately forthcoming, an eyewitness to the altercation was cited in local media as saying, “If you’re that into politics, don’t put yourself in a situation where it could become a problem for you.”

The eyewitness and fellow Social Distortion concert goer also admitted, however, “It was a little bit excessive.”

Something like this happened at nearly every punk gig I went to in the late 70s, though then instead of pummeling someone wearing a MAGA hat, they’d tend to go after the unfortunate person who showed up wearing a Styx t-shirt….https://t.co/qmEvyghjpg

— Jeffrey St. Clair (@JSCCounterPunch) August 15, 2018

Punk rock has since its origins had a reputation of being politically controversial and has a subculture and atmosphere of violent live shows.

After security broke up the fight, Hildebrand said he left with two black eyes, a busted lip, a concussion and a missing tooth, though investigating police have yet to confirm the injuries. 

“I wasn’t able to defend myself because people in the crowd were holding me back,” the fan explained.

Social Distortion is known for delivering anti-Trump and anti-Republican tirades at their live shows of late. 

Now that the story is going national, it will be interesting to see if the band faces a backlash for the antics, or perhaps their popularity will only increase. 

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Authored by Nicholas Colas via DataTrekResearch.com,

Having covered cyclical industries (primarily autos, in my case) since the early 1990s, I vividly remember every financial crisis of the last 30 years because “my” stocks always get destroyed in the process. Based on that experience I can tell you every such event feels unique and shocking as you transit through them. To borrow from Tolstoy, every happy market is the same, but every crisis market is different in its own way.

The Turkish lira crisis is getting a lot of comparisons to the 1997 Asia crisis, so today we’ll play the part of crusty market veteran and outline a framework to evaluate some similarities and differences. We have a more emerging-markets specific take on things in our Data section, so we’ll keep this part pointed at US equity and bond markets.

#1. Like today’s US equity market, in 1997 stocks had already posted many years of strong performance. From 1982 to 1996, the S&P 500 had only logged one down year (1990, down 3.1% on a total return basis). Average annual total returns were 17.2% across that 15-year span. The comparison to now: in the 9 years since the 2008 Financial Crisis, US stocks have averaged a 15.5% total return with no down years in terms of total return.

Bottom line: man-made financial crises tend to occur at the end of a long run of strong economic growth/financial asset returns, and every investor knows this. That’s an important reason why the situation in Turkey resonates as an important risk factor just now.

#2. The spillover effects of the 1997 Asia crisis took many months to reach US stock markets. The problems started in early July with the Thai government devaluing the baht, which came as a surprise to markets despite Bangkok’s clearly dwindling foreign currency reserves. Other Asia countries – the Philippines, Malaysia and Indonesia – followed suit. Growth slowed across East Asia, damaging the Hong Kong and South Korean economies as well.

Meanwhile, back in the US, the S&P 500 was up 7.0% in July. It then treaded water between 900 and 970 until October 27th, when it fell 6.9%. That one-day drop is why US investors remember the Asia Crisis (that is certainly the case for me), and primarily because the NYSE took the controversial step to end trading early that day.

Bottom line: remember that the S&P 500 posted a 33.1% total return in 1997, a stellar return. The Asia Crisis did cause a dramatic risk-off day as global equity investors finally panicked about potential global spill over of the problems in Southeast Asia. But there were also positive effects on the US economy, such as lower inflation from cheaper imports as well as lower long-term interest rates as investors bought Treasuries to reduce portfolio risk.

#3. Even if history ends up rhyming “Turkey” and “Thailand”, there are important structural differences between 1997 and 2018.

On the bullish side of the coin, investors now should have more confidence in the US financial system because of incremental Federal Reserve regulation since the 2008 Financial Crisis. Recall that the 2018 stress included a “severely adverse scenario” of:

• 10% US unemployment,

• a 65% drop in equity prices,

• and global synchronized recession with strong deflationary pressures.

By the Fed’s analysis the US banking system can withstand those extreme events without cratering, so a milder financial shock like an emerging markets crisis should leave banks able to support consumer and business lending rather than seizing up and causing a recession. Bank stocks may not do well (they have taken a hit in the last week), but the banking system itself should prove sound. If investors believe the Fed’s stress tests, this may even reduce equity market volatility versus past crises.

On the bearish side of things, the current Turkish situation sits against a very different geopolitical backdrop than the 1997 Asia Crisis. Back then, everyone from the IMF to the Federal Reserve stepped in, and the economies in question took the medicine required to turn things around. There is little proof the current administration in Ankara would do the same, and the fractured relationship between the US and Turkey will not help either.

Summing up, three points to keep in mind:

• Emerging market crises take time to develop, and at first US stocks will ignore any potential impact.

• US equities can continue to rally even as a crisis takes hold, provided there is no adverse impact to the US economy. The Fed’s post Financial Crisis stress test process should make that more likely than in past cycles.

• EM crises do make the chance of wild – but short – swings in equity prices more likely. Forewarned is forearmed on this point.

 

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The Australian household debt to income ratio has ballooned to shocking levels over the past three decades as Sydney is ranked as one of the most overvalued cities in the world.

According to the Daily Mail Australia, credit card bills, home mortgages, and personal loans now account for 189 percent of an average Australian household income, compared with just 60 percent in 1988, as Callus Thomas, Head of Research of Topdown Charts, demonstrates that record high household debt is a ticking time bomb:

The average Australian credit card bill is roughly $3,272.70 as average income earners spend at least $2,000 a month on mortgage repayments, which has contributed to the affordability crisis, said the Daily Mail Australia. The average Australian holds about a $400,000 mortgage after they put down 20 percent deposit for a $500,000 property. The paper notes that the loan would barely buy a one-bedroom unit in most outer suburbs, as full-time workers take in about $82,000 salary per annum and spend an alarming 40 percent on mortgage repayments.

With household debt at crisis levels, CoreLogic said Australian home prices experienced their sharpest monthly drops in July since late 2011 as declines gathered momentum in Sydney and Melbourne (Sydney and Melbourne cover about 60 percent of Australia’s housing market by value and 40 percent by number). Nationally, the index of home prices dropped .60 percent in July from June, leading to an annual fall of 1.6 percent.

The brunt of the slowdown has been most significant in Sydney, where values were lower 5.4 percent in the year to July, while Melbourne slid 0.5 percent. Home price declines were the sharpest in expensive regions, while the affordable housing segment of the market experienced less stress.

With Sydney and Melbourne home prices fading from their 2017 peaks, CommSec economist Ryan Felsman said millennials are struggling to service their mortgage payments.

“Household debt is elevated particularly in those two cities because of the fact that home prices rose so significantly over the last decade,” he said.

Wage stagnation and elevated home prices have turned into the perfect storm that will bring forward a housing crisis.

AMP Capital chief economist Shane Oliver suggests, otherwise, he believes a housing crash in Sydney and Melbourne is unlikely as long as high immigration fuels demand.

“That’s why prices haven’t come back down,” he told Daily Mail Australia today.

Oliver did mention that Australian home prices were likely to fall by double-digit percentages but limited his forecast to about 15 percent, in the coming years.

“The best possible scenario for young people is that prices come off say another 10 percent and then we spend many years where prices just go sideways and wages eventually catch up,” he said.

Australian Bureau of Statistics lending finance data published this month showed the average credit card debts had risen by $21.30 to a five-year high of $3,272.70 in June.

Australia has transitioned from the lowest household debt-to-income ratio to the highest in the world, in just three decades.

John Adams, chief economist at As Good as Gold Australia, teamed up with Martin North from Digital Finance Analytics in the below video, which discusses Australia’s household debt dynamics in greater detail:

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Authored by Michael Snyder via The Economic Collapse blog,

Is humanity approaching a major turning point? 

A computer model that was originally developed in 1973 by a group of scientists at MIT is warning that things are about to dramatically change. 

If the computer predictions are accurate, our standard of living will start to decline dramatically around the year 2020, and we will witness the “end of civilization” around the year 2040. 

Of course this is not the first time ominous predictions such as this have been made about our future. 

For years, experts have been warning that we are heading for severe shortages of water, food and oil as our limited natural resources begin to run out.  For years, experts have been warning that our economic model is not sustainable and that we are heading for a historic collapse.  For years, experts have been warning about the alarming increase in seismic activity all over the planet and about the proliferation of weapons of mass destruction. 

Society is crumbling all around us, and the elements for a “perfect storm” are definitely coming together.

So maybe this computer model is on to something.

The name of the computer program is “World One”, and it was originally created by Jay Forrester…

The prediction came from a programme nicknamed World One, which was developed by a team of MIT researchers and processed by Australia’s largest computer.

It was originally devised by computer pioneer Jay Forrester, after he was tasked by the Club of Rome to develop a model of global sustainability.

However, the shocking result of the computer calculations showed that the level of pollution and population would cause a global collapse by 2040.

The fact that the Club of Rome was behind Jay Forrester’s work is a major red flag, because David Rockefeller and other globalists founded the Club of Rome and it has always been used to further the globalist agenda.

Could it be possible that this computer model is a glimpse into the kind of future that the globalists believe is coming?

According to the model, life as we know it is about to change in a massive way…

At this time the broadcasters addreses the audience: “At around 2020, the condition of the planet becomes highly critical.

“If we do nothing about it, the quality of life goes down to zero. Pollution becomes so seriously it will start to kill people, which in turn will cause the population to diminish, lower than it was in the 1900.

“At this stage, around 2040 to 2050, civilised life as we know it on this planet will cease to exist.”

The computer model appears to be primarily concerned with natural resources, pollution and population levels, but other factors should be considered as well.

In order to have “civilization”, people need to behave in a civilized manner, and we see more evidence that we are in an advanced state of social decay on a daily basis.

For example, one would think that priests would be some of the most well-behaved and “civilized” members of our society, but a new report about clergy child abuse in Pennsylvania is pulling back the curtain on incredible acts of darkness…

Horrific details have emerged about predatory behavior by priests, including those who made young boys rinse their mouths with holy water to ‘purify’ them after they were forced to give oral sex and one young boy made to pose naked as Jesus while other priests took pornographic pictures and shared them with other clergymen.

A bombshell report by a grand jury in Pennsylvania has extensively detailed for the first time how 300 priests sexually abused more than 1,000 children and how church leaders, some of whom are still alive, covered it up.

Remember, these 300 priests are just from one state.  There are countless other incidents of abuse all over the country, and it is a crisis that appears to be escalating.

Earlier today, I came across a story about a 22-year-old man in Michigan that approached a group of young girls in a forceful manner, but fortunately they were able to fight him off…

Four Michigan girls successfully fought off a man who allegedly intended to kidnap and have sex with one of them by punching him and flinging hot coffee in his face.

Bruce Hipkins, 22, of Tuscola County, Michigan, was charged with kidnapping, unlawful imprisonment, assault and battery and criminal sexual conduct charges following the incident which occurred Friday night.

The thin veneer of civilization that we all take for granted on a daily basis is wearing very thin, and it is all that really separates us from societal collapse, chaos and anarchy.

Ultimately, a computer model from 1973 is probably not going to be the best guide, but I do agree that enormous societal changes are heading our way very rapidly.  In fact, I wrote an entire novel about what America will start to look like as those societal changes begin to accelerate.  I am more convinced than ever that America is heading for a “perfect storm” that will bring us to our knees, but most Americans appear to have bought into the fiction that everything is going to be okay somehow even though it is exceedingly clear that virtually nothing about our society is sustainable over an extended period of time.  A day of reckoning is inevitably coming, and even a computer model from 1973 can see that.

For those of you that have stopped, it is time to start prepping again.  A major international debt crisis has started, war almost erupted in the Middle East last week, and civil unrest is starting to erupt in major cities all across America.

I believe that we are going to witness bigger changes over the next two years than we have over the last ten years combined.  The clock is ticking, and America’s date with destiny is fast approaching.

As always, let us hope for the best, but let us also get prepared for the worst.

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San Francisco authorities have finally decided to do something about the vast amounts of vagrant-generated feces covering its streets, after thousands of feces complaints, the cancellation of a major medical convention and an outraged new Mayor, London Breed, who was absolutely shocked after walking through her city. 

“I will say there is more feces on the sidewalks than I’ve ever seen growing up here,” Breed said last month.  “That is a huge problem and we are not just talking about from dogs — we’re talking about from humans.”

While Breed’s solution in July was to kindly ask homeless people to stop dropping deuces on public walkways, her way better idea is the “Poop Patrol” which she cooked up with Public Works director Mohammed Nuru. The patrol will consist of a team of five staffers who will don protective gear and patrol the alleys around Polk Street and other “brown zones” in search of everything from hepatitis-laden Hershey squirts to worm-infested-logs. At the Poop Patrol’s disposal will be a special vehicle equipped with a steam cleaner and disinfectant. 

The team’s will begin their shifts in the afternoon, spotting and cleaning piles of feces before the city receives complaints. 

“We’re trying to be proactive,” explained Public Works director Mohammed Nuru. “We’re actually out there looking for it.”

We’re all out there looking for it, our eyes trained on the sidewalks as we walk so as to avoid that awful squishy feeling.

I admit to giggling when Nuru told me about plans for the Poop Patrol the other day. But in a city where people called 311 to report feces a whopping 14,597 times between Jan. 1 and Monday morning, public piles of poop are serious business.

For the record, that’s about 65 calls regarding sidewalk poop every day. And it’s 2,427 more calls on the stinky subject than were made in the same time period last year.

The Poop Patrol idea sprung from conversations between Nuru and Mayor London Breed, both of whom have expressed disgust with the filthy conditions of our sidewalks. –SF Chronicle

“I’ve been talking to the Department of Public Works director on a regular basis, and I’m like, ‘What are we going to do about the poop?’” Breed told the SF Chronicle‘s Heather Knight, who noted that it was the “first conversation I’ve ever had with a mayor that included the word “poop.”” 

Breed has also committed $1.05 million of the city’s giant $11.5 billion budget to construct five new Pit Stop public toilets, while expanding operating hours at five existing locations out of the city’s 22 total. 

Doniece Sandoval is the founder of Lava Mae, which provides mobile shower stalls and toilets to homeless people around San Francisco, Oakland and Los Angeles. She got the idea after learning San Francisco had a measly 16 shower stalls for homeless people. 

“We need our streets cleaned up, so I love that they’re doing the Poop Patrol,” she said, giggling at the name like I did. “But there’s no doubt about the fact that we need more public bathrooms. Everywhere we can, we need to make them available. For our unhoused neighbors and everyone in the city, when you need to be able to find a facility, it shouldn’t be this massive challenge.” –SF Chronicle

Many of the complaints also connect the fecal matter to vagrants and homeless encampments – a sight all too common now across California.

Users can geotag the location in question, and also provide photos to support their claim.

“Homeless encampment is blocking sidewalk and creates a health hazard w trash and feces,” writes one user.

“Please move them, and send a cleaning crew. Sidewalk is impassable, forcing pedestrians into the street.”

“Homeless individuals sleeping along Funston between Clement and Geary,” writes another user. 


“Observed homeless people shooting up at 5pm on Monday, July 2nd. Lots of feces and garbage in the area. Please clean up area and see if homeless individuals need services.”

A recent NBC Bay Area investigation into the alarming volume of trash, drug needles and fecal matter around a 153-block area of San Francisco revealed “trash on every block, 100 needles, and more than 300 piles of feces along the 20-mile stretch of streets and sidewalks.”

As the Investigative Unit photographed nearly a dozen hypodermic needles scattered across one block, a group of preschool students happened to walk by on their way to an afternoon field trip to city hall.

“We see poop, we see pee, we see needles, and we see trash,” said teacher Adelita Orellana. “Sometimes they ask what is it, and that’s a conversation that’s a little difficult to have with a 2-year old, but we just let them know that those things are full of germs, that they are dangerous, and they should never be touched.” –NBC Bay Area

Meanwhile, in early July a major medical convention expected to bring in 15,000 visitors and drop $40 million in less than a week decided to permanently move to another city. From the San Francisco Chronicle: +

“It’s the first time that we have had an out-and-out cancellation over the issue, and this is a group that has been coming here every three or four years since the 1980s,” said Joe D’Alessandro, president and CEO of S.F. Travel, the city’s convention bureau…

“They said that they are committed to this year and to 2023, but nothing in between or nothing thereafter,” D’Alessandro said. “After that, they told us they are planning to go elsewhere — I believe it’s Los Angeles.”

The doctors group told the San Francisco delegation that while they loved the city, postconvention surveys showed their members were afraid to walk amid the open drug use, threatening behavior and mental illness that are common on the streets.

CBS affiliate KPIX 5 ran a story on the convention complete with man-on-the-street interviews. The people they talked to aren’t shocked by the decision:

Tourists once took home memories of famed cable cars. These days, too often it is of the image of someone begging, or dancing in circles, or just wandering around the streets intoxicated or mentally ill.

“You can smell it,” says one tourist.

“I come from a third world county and it is not as bad as this,” says another.

Here’s the report:

Perhaps the convention will come back now that the Poop Patrol is on the case? 

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Authored by Ted Dabrowski and John Klingner via WirePoints.com,

Chicagoans have no idea how much pension debt Illinois politicians have saddled them with. Officially, Windy City residents are on the hook for $70 billion in total pension shortfalls from the city and its sister governments plus a share of Cook County and state pensions.

But listen to Moody’s Investors Service, the rating agency that’s been most critical of Chicago’s finances, and you’ll get a different picture. Moody’s pegs the total pension debt burden for Chicagoans at $130 billion, nearly double the official numbers. (Yes, by chance the number is eerily similar to the official shortfall of $129 billion facing the five state-run pension funds. But don’t confuse the two.)

That’s scary news for Windy City residents. Barring real reforms, concessions from the unions or bankruptcy, Chicagoans can expect to be hit with whatever series of tax hikes politicians will try to enact to reduce that debt.

That $130 billion is the total Moody’s calculates when adding up the direct pension debt owed by the city government, Chicago Public Schools, the park district and Chicago’s share of various Cook County governments and the five state pension funds. Moody’s takes a more realistic approach to investment assumptions than the city and county governments take.

Officially, the four city-run funds have $28 billion in unfunded pension debts.

Then there’s another $11 billion in official CPS teacher pension debt. Add another $4 billion from the Chicago Park District and the city’s pro-rata share of Cook County-related pension debt. Finally, add Chicagoans’ $27 billion share of the state’s pension debt ($129 billion). In total, the official debt Chicagoans are stuck with adds up to $70 billion.

That’s over $67,000 in pension debt for each household in Chicago.

But the burden is so much higher than that. That $70 billion is based on the rosy actuarial assumptions used by the pension funds.

Other financial institutions, including Moody’s, use far more realistic assumptions to figure out the size of Chicago and the state’s pension debt. Under Moody’s calculations – what they call the Adjusted Net Pension Liability (ANPL) – Chicagoans’ pension debt burden is far bigger.

The unfunded liability of Chicago’s four city-run funds alone under Moody’s calculation swells to $42 billion. Chicago Teachers Pension Fund debt more than doubles to $25 billion. And Chicagoans’ share of the state’s $250 billion ANPL becomes $53 billion.

In all, Chicagoans are on the hook for $130 billion in unfunded overlapping Chicago-area and state ANPL, according to Moody’s.

That translates to nearly $125,000 in pension debt for every household in Chicago.

But with so many Chicagoans in or near poverty (27 percent), that burden won’t be distributed evenly. Expect Chicago’s middle class to be stuck with an even bigger burden that makes up for those that can’t pay.

*  *  *

Chicagoans are stuck watching their elected officials do all the wrong things when it comes to pensions.

Politicians have passed record property tax hikes. They’ve covered up the city’s financial problems with gimmicks. They’re looking at a $10 billion pension bond to paper over the crisis.

And they won’t even tell the truth about the massive amount of unfunded liabilities residents are facing.

Fixing the pension crises in Illinois starts with telling the truth. Because acknowledging the real numbers shows just how important real reform is.

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In the latest diplomatic salvo in the escalating war of words between Washington and Ankara, the United States on Wednesday ruled out removing steel tariffs that contributed to a currency crisis in Turkey even if Ankara frees a U.S. pastor, offsetting a pledge by Qatar to invest $15 billion in Turkey, boosting the Turkish lira even as all other Emerging Market currencies tumbled.

The White House’s latest stance gives Turkish authorities little incentive to work for the release of pastor Andrew Brunson who is under house arrest in Turkey on terrorism charges and whose case Turkish officials have said was a matter for the courts. Meanwhile, Trump continues to demand Brunson’s release and has warned that US sanctions and tariffs will only escalate until his release.

Yet while the Brunson matter appears to have hit a dead end, and is far from being resolved, Turkish President Erdogan got an unexpected boost from Qatar’s Emir, who approved a $15 billion package of economic projects, investments and deposits will be channeled into banks and financial markets, after the two met in Ankara. Yet, as Jim O’Neill wrote earlier, while Qatar, one of Turkey’s closest Gulf allies, could provide financial aid, it does not ultimately have the wherewithal to pull Turkey out of its crisis singlehandedly.

Still, the Qatar “gift” offered further support to a lira rally after the Turkish central bank tightened liquidity and curbed selling of the currency, which sent the USDTRY tumbling from 6.80 to below 6.00, after hitting a record 7.24 in early Monday trading, unleashing contagion across emerging markets and threatening the stability of Turkey’s financial sector.

The lira had lost up to 45% against the dollar this year, driven by worries over Erdogan’s growing control over the economy and his repeated calls for lower interest rates despite high inflation.

And so the trade spat between the two NATO allies continues: last Friday, Trump doubled tariffs on Turkish metals exports to the United States, prompting Turkey – which said it will not bow to threats – to raise tariffs on U.S. cars, alcohol and tobacco by the same amount on Wednesday.

The White House condemned the Turkish response as “a step in the wrong direction” and signaled a hard line on Brunson’s release, according to Reuters.

“The tariffs from Turkey are certainly regrettable and a step in the wrong direction. The tariffs that the United States placed on Turkey were out of national security interest. Theirs are out of retaliation,” White House spokeswoman Sarah Sanders told reporters.

Sanders also said Brunson’s release would not lead to an easing in the tariffs, but that it could lead to an easing in sanctions: “The tariffs that are in place on steel will not be removed with the release of pastor Brunson. The tariffs are specific to national security.”

“Pastor Andrew Brunson is an innocent man held in Turkey & justice demands that he be released. Turkey would do well not to test @POTUS Trump’s resolve to see Americans who are wrongfully imprisoned in foreign lands returned home to the United States,” Vice President Mike Pence said in a tweet.

Pastor Andrew Brunson is an innocent man held in Turkey & justice demands that he be released. Turkey would do well not to test @POTUS Trump’s resolve to see Americans who are wrongfully imprisoned in foreign lands returned home to the United States.

— Vice President Mike Pence (@VP) August 15, 2018

Meanwhile, confirming again that diplomatic relations between the two nations will only deteriorate, White House spokeswoman Sarah Sanders made clear the United States had no plan to remove the steel tariffs if Brunson were released though she said it could remove sanctions imposed on two senior Turkish officials.

However, a potential breakthrough emerged when Turkish Foreign Minister Mevlut Cavusoglu struck a somewhat conciliatory note, with Reuters reporting that he said Turkey was ready to discuss its issues with the United States “as long as there are no threats.”

That helped nudge the Turkish lira just fractionally higher, coupled with earlier optimism about better relations with the European Union after a Turkish court released two Greek soldiers pending trial. Cavusoglu said ties with the bloc, long strained, were on a firmer basis and had started normalizing according to Reuters.

Early on Wednesday morning, the Turkish banking watchdog’s step to limit foreign exchange swap transactions – a page right out of the Chinese central bank’s playbook – also helped the currency.

“They are squeezing lira liquidity out of the system now and pushing interest rates higher,” said Cristian Maggio, head of emerging markets strategy at TD Securities.

“Rates have gone up by 10 percent … The central bank has not done this through a change in the benchmark rates, but they are squeezing liquidity, so the result is the same,” he said.

In another potential catalyst for stabilization, tomorrow at 9am a consortium of banks led by Citi, Deutsche Bank, and HSBC, will hold a conference call with the Turkish finance minister (and Erdogan’s son-in-law), Berat Albayrak, to reassure international investors; some 3,000 people have reportedly signed up so far.

Meanwhile, after suffering tremendous losses in the bond market amid fears it would be unable to rollover its US dollar-denominated debt, the CEO of Turkey’s Akbank said the banking sector remained strong and the measures taken to support the market had started to have an impact, adding there was no withdrawal of deposits although we doubt he would say otherwise if there was.

As for the Brunson case, there is no resolution in sight: on Wednesday, a court in Izmir, where Brunson is on trial, rejected his appeal to be released from house arrest. An upper court had yet to rule on the appeal, his lawyer told Reuters. However, in a separate high-profile case, a Turkish court sent the US a signal when it freed Taner Kilic, the local chair of Amnesty International. Perhaps all that is needed for the crisis to end is some goodwill and a willingness to ease back a little. The question remains, however, who will do it first: Trump or Erdogan?

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Authored by Simon Black via SovereignMan.com,

It was late October, 1989.

East Germany was disintegrating, and the Berlin Wall was days away from coming down.

The Soviet Union was just starting to fall apart.

George H. W. Bush (the elder) was President of the United States.

And the #1 movie in the world was John Travolta’s Look Who’s Talking.

It was during that month that the US stock market, as measured by the S&P 500 index, began a decline that would last for roughly 12 months.

The stock market finally reached its lowest point the following year, on October 11, 1990, when the S&P closed at 295.46.

It would never see a level that low ever again.

Starting the following day, the S&P 500 began a historic rise that would persist for nearly a decade– a total of 3,452 days.

In financial parlance this is known as a bull market, when stocks and other asset prices generally rise for years at a time.

Prior to 1989, the average US bull market only lasted about 46 months– 1402 days.

And the longest on record was the bull market of the late 1970s that lasted 2,274 days, about 6.25 years.

So the 1990s bull market (which ended on March 24, 2000) completely shattered the previous record by more than 50%.

Now, you may recall the 1990s– there were a lot of game-changing events that drove stock prices ever higher.

The fall of the Soviet Union was tremendously important in creating greater stability in the world and vastly expanding lucrative global trade.

China underwent a series of MAJOR economic reforms that rocket-propelled the economy into a huge profit center for US companies.

And of course, the Internet became a worldwide sensation.

On the backs of these trends (plus a gift of relatively low interest rates by the Federal Reserve) the US stock market became the envy of the world.

It all ended in 2000 after the dot-com crash.

Stocks sputtered for a few years, started to rise a bit, then crashed again in late 2008 at the onset of the Global Financial Crisis.

The market finally bottomed out on March 9, 2009 when the S&P 500 hit the ominous level of 666.

And for the past decade, the market has been moving ever higher– up a total of 325% since then.

So far this current bull market has run an unbelievable 3,446 days, which means it’s just ONE WEEK away from officially becoming the LONGEST BULL MARKET IN HISTORY.

One thing we know for certain is that all markets move in cycles.

There are always ups and downs, booms and busts. Tough times ALWAYS follow the good.

And, at 3,446 days… within a week of the all-time record… this bull market is clearly VERY late in its cycle.

The nature of this particular bull market is also quite peculiar.

Unlike the 1990s, there are no game-changing geopolitical or technological trends underpinning this bull market.

Instead, the key driver of higher asset prices has been 10 years worth of nearly 0% interest rates, giving EVERYONE the ability to borrow cheaply.

This has driven real estate prices to all-time highs, in many cases to absolutely absurd levels.

Bond markets are still near all-time highs.

Companies like Netflix and Tesla which lose money and rapidly burn through their investors’ capital have no problems borrowing billions of dollars.

And there are still trillions of dollars worth of bonds out there with NEGATIVE yields. It’s ridiculous.

Many stock markets around the world are at/near all-time highs as well, with investors paying record high valuations for their shares.

This means that, in many cases, investors have literally never paid a higher price for every dollar of a company’s revenue, earnings, and assets.

And the shares of nearly every well-managed, high quality business have been bid up to mind-blowing levels.

Legendary investor Warren Buffett seems to have thrown up his hands with the ridiculousness of this market.

I’ve written before that Buffett has stockpiled $110 billion. But there’s nowhere for him to invest it.

Bargains are so scarce, in fact, that Buffett is going to resort to buying back shares of his own company, Berkshire Hathaway.

This is a pretty big deal.

Buffett has had a longstanding policy that he would not use company funds for stock buybacks unless the share price became materially undervalued.

But Buffett hasn’t made a major acquisition in more than two years; asset prices are simply too expensive, and he’s too seasoned to overpay for investments.

So, a bit anxious to deploy their massive pile of capital, Berkshire Hathaway’s board changed its policy on share buybacks.

Buffett now has far more latitude to use the company’s money to buy back its own stock.

It’s a subtle change, but the implications are clear:

Buffett has few places to invest his $110 billion cash pile. So he wants the freedom to buy more Berkshire stock (an asset he is intimately familiar with and which he controls).

Said another way, Buffett has so much cash that he had to break his own, longstanding rule in order to safely deploy capital.

It’s interesting that, while all of this is happening, small investors are piling into the stock market en masse.

The CEO of TD Ameritrade (one of the largest stock brokerages in the world) stated earlier this year that “[t]here is an enormous amount of new retail money coming into the market. . .”

Other brokerages like eTrade and Schwab have seen similar trends.

So while small, individual investors are piling in, Buffett is standing pat… and resorting to buying back his own stock just to have a safe place to deploy some capital.

No one knows how much longer this historic bull market going to last. Or what’s going to end it.

But it’s safe to say that there are fewer days ahead of us than behind us.

And, in times like these, it might make more sense being prudent than being greedy.

And to continue learning how to safely grow your wealth, I encourage you to download our free Perfect Plan B Guide.

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