Author: admin

A funny thing happened on the way to impeaching Donald Trump. After two-years of investigations by a highly politicized FBI and a Special Counsel stacked with Clinton supporters, Robert Mueller’s probe has resulted in the resignation of National Security Advisor Michael Flynn, the arrests of Paul Manafort and Rick Gates, and the indictment of 13 Russian nationals on allegations of hacking the 2016 election – along with the raid of Trump’s personal attorney, Michael Cohen.

The nation has been on the edge of insanity waiting for that much-promised and long awaited link tying President Trump to Vladimir Putin we were all promised, only to find out that there is no link, the deck appears to have been heavily stacked against Donald Trump by bad actors operating at the highest levels of the FBI, DOJ, Obama admin and Clinton camp, and the real Russian conspiracy in the 2016 election was the participation of high level Kremlin sources used in the anti-Trump dossier that Hillary Clinton paid for.

Now, as the out-of-control investigation moves from the headlines and into court, the all-encompassing “witch hunt,” as Trump calls it, may be in serious jeopardy. 

As of Friday, three separate Judges have rendered harsh setbacks to the Mueller investigation – demanding, if you can believe it, facts and evidence to back up the Special Counsel’s claims – in unredacted format as one Judge demands, or risk having the cases tossed out altogether. 

The first major setback happened in February, when the federal judge assigned to the criminal case against Trump’s former National Security Judge Emmet G. SullivanMueller’s team to turn over any “exculpatory evidence” to Flynn’s defense. 

Oddly, Flynn’s legal team never made this request. Instead, Judge Emmet G. Sullivan issued the order “sua sponte,” or at his discretion, invoking the “Brady Rule” – which requires prosecutors to turn over previously unfiled evidence that might have a material impact on a defendant’s case. Two days before Sullivan’s order, Mueller filed a motion for a protective order regarding the use of evidence in the case, including “sensitive materials,” which would be provided to Flynn’s lawyers by the office of the Special Counsel.

This development generated a significant buzz in conservative circles, with the implication being that perhaps Flynn might not have pleaded guilty in light of certain evidence. 

We also know that the FBI agents who interviewed Flynn – one of whom was anti-Trump counterintelligence agent Peter Strzok, did not think Flynn was lying to them – something James Comey was recently caught lying about himself. 

Fox‘s Judge Andrew Napolitano thought Sullivan’s decision at the time was a complete bombshell. 

“Why would he we want that after General Flynn has already pleaded guilty? That is unheard of. He must suspect a defect in the guilty plea. Meaning, he must have reason to believe that General Flynn pleaded guilty for some reason other than guilt.” –Andrew Napolitano

And as we noted yesterday, some have suggested that Flynn pleaded guilty due to the fact that federal investigations tend to bankrupt people who aren’t filthy rich – as was the case with former Trump campaign aide Michael Caputo, who told the Senate Intelligence Committee “God damn you to hell” after having to sell his home due to mounting legal fees over the inquiry. 

“Your investigation and others into the allegations of Trump campaign collusion with Russia are costing my family a great deal of money — more than $125,000 — and making a visceral impact on my children.”

Is it not possible he just plead guilty because of the financial burden it created and is creating on our family?? https://t.co/gx5sLLa1K9

— 🇺🇸MFLYNNJR🇺🇸 (@mflynnJR) April 23, 2018

Let’s not forget about the time Mueller’s team at the FBI massively screwed up the 2001 anthrax case after 9/11 – ruining the life of SAIC employee Steven Hatfill when it mysteriously leaked that he was the FBI’s prime suspect. Mueller assured Congress in a closed-door January, 2003 session that Hatfill was their man based on shaky evidence which was later deemed unreliable. Effectively, he needed a scalp. Hatfill was professionally and financially ruined until he sued the US Government for $5.8 million.

“It’s like death by a thousand cuts,” Hatfill, who is now 56, says today. “There’s a sheer feeling of hopelessness. You can’t fight back. You have to just sit there and take it, day after day, the constant drip-drip-drip of innuendo, a punching bag for the government and the press. And the thing was, I couldn’t understand why it was happening to me. I mean, I was one of the good guys.” –The Atlantic

Then there’s the judge in the Manafort Case, who excoriated a Special Counsel attorney on Friday during a “motion to dismiss” hearing. A leaked transcript of the heated exchange between attorney Michael Dreeben and Eastern District of Virginia Judge T.S. Ellis reveals that the entire Manafort case is in jeopardy if the Special Counsel doesn’t produce an unredacted copy of the original order from Deputy AG Rod Rosenstein authorizing the original investigation.

Ellis also said that Mueller shouldn’t have “unfettered power” to prosecute Manafort for charges that have nothing to do with collusion between the Trump campaign and the Russians, and called out the DOJ’s efforts in the case as an attempt by Mueller to gain leverage over Manafort.

“You really care about what information Mr. Manafort can give you that would reflect on Mr. Trump or lead to his prosecution or impeachment or whatever. That’s what you’re really interested in.” –Judge Ellis

The Judge also notes that the Special Counsel’s indictment against Manafort doesn’t mention:

(1) Russian individuals
(2) Russian banks
(3) Russian money
(4) Russian payments to Manafort

To which Dreeben provided an unsatisfactory lawyerly response about how everything is connected to everything (including, apparently, whether Trump paid a woman to keep quiet about consensual sex). 

Last – but we’re quite sure not least, was last week’s ruling by federal Judge Dabney Friedrich, a Trump appointee, denying Mueller a trial delay over the high-profile February indictment of 13 Russians for interfering in the 2016 US election.

Mueller accused 13 Russian nationals and three Russian entities – one of which was Concord Management and Consulting, of “knowingly and intentionally” conspiring to interfere with the election by using social media to disparage Hillary Clinton and support Donald Trump. 

And Concord Management decided to fight it… 

As PowerLine notes, Mueller probably didn’t see that coming – and the indictment itself was perhaps nothing more than a PR stunt to bolster the Russian interference narrative. 

I don’t think anyone (including Mueller) anticipated that any of the defendants would appear in court to defend against the charges. Rather, the Mueller prosecutors seem to have obtained the indictment to serve a public relations purpose, laying out the case for interference as understood by the government and lending a veneer of respectability to the Mueller Switch Project.

One of the Russian corporate defendants nevertheless hired counsel to contest the charges. In April two Washington-area attorneys — Eric Dubelier and Kate Seikaly of the Reed Smith firm — filed appearances in court on behalf of Concord Management and Consulting. Josh Gerstein covered that turn of events for Politico here. –Powerline Blog

Politico’s Gerstein notes that by defending against the charges, “Concord could force prosecutors to turn over discovery about how the case was assembled as well as evidence that might undermine the prosecution’s theories.”

In a mad scramble to put the brakes on the case, Mueller’s team tried to say that Concord never formally accepted the court summons related to the case, wrapping themselves in a “cloud of confusion” as Powerline puts it. “Until the Court has an opportunity to determine if Concord was properly served, it would be inadvisable to conduct an initial appearance and arraignment at which important rights will be communicated and a plea entertained.”

The Russians hit back against Mueller’s attempt to delay – filing a response on Friday to let the court know that “[Concord] voluntarily appeared through counsel as provided for in [the Federal Rules of Criminal Procedure], and further intends to enter a plea of not guilty. [Concord] has not sought a limited appearance nor has it moved to quash the summons. As such, the briefing sought by the Special Counsel’s motion is pettifoggery.”

And the Judge agreed…

A federal judge has rejected special counsel Robert Mueller’s request to delay the first court hearing in a criminal case charging three Russian companies and 13 Russian citizens with using social media and other means to foment strife among Americans in advance of the 2016 U.S. presidential election.

In a brief order Saturday evening, U.S. District Court Judge Dabney Friedrich offered no explanation for her decision to deny a request prosecutors made Friday to put off the scheduled Wednesday arraignment for Concord Management and Consulting, one of the three firms charged in the case. –Politico

In other words, Mueller was just denied the opportunity to kick the can down the road, and will likely be forced to produce the requested evidence or withdraw the indictment, potentially jeopardizing the PR aspect of the entire “Trump collusion” probe.  

As Mueller’s “witch hunt” moves from the headlines to courtrooms with no-nonsense Judges, dismissals and withdrawn cases risk further delegitimizing the already-beleaguered Special Counsel investigation of President Trump and the 2016 US election. 

One wonders how much this whole thing has cost taxpayers so far?

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With the Iran Deal looking increasingly fragile, front-month WTI futures have just traded above $70 for the first time since Nov 2014.

$70 just happens to be the 50% retracement from the Aug 2013 highs to the Feb 2016 lows…

As OilPrice.com’s Tsvetana Paraskova notes, US President Donald Trump has another week to decide whether to waive the sanctions against Iran. Expectations that he would not waive the sanctions this time around have supported the price of oil over the past month, with Brent briefly breaching above $75 to its highest price level since November 2014.

Analysts are still struggling to quantify the impact of possible fresh sanctions on Iran and prices are expected to be volatile as the deadline for President Trump’s decision is getting closer.

The month of May could be a very important one for oil prices with geopolitical risks stacked and too close to call. Apart from the Iran sanctions waiver, the market will be looking to the Venezuela presidential election that socialist leader Nicolas Maduro has scheduled for May 20.

“The geopolitical landscape will therefore remain tense and price conditions volatile,” Stephen Brennock, an analyst at PVM Oil Associates, told Platts on Friday.

Commenting on the Iran sanctions waiver, Commerzbank analysts said in a note:

“This will be the main issue preoccupying the oil market, with fundamental factors such as stock levels and production data taking a backseat until this has been resolved”.

Even more worrisome, as OilPrice.com’s Kent Moors writes, is that Trump walking away from the deal, and possibly re-imposing sanctions on Iran could throw the oil market into chaos.

An agreement is an agreement, or so it’s said.

Tensions are skyrocketing after Israeli Prime Minister Netanyahu’s claim that Iran has violated the Joint Comprehensive Plan of Action (JCPOA) agreement.

This is the deal that was meant to shut down Iran’s nuclear weapons program.

Whether Netanyahu is correct or not, it puts the ball in President Trump’s court. Remember, he has questioned the JCPOA since before his election.

But while the talking heads on TV will tell you that cancelling the JCPOA and renewing sanctions on Iran will drive oil prices up…

The truth is much messier. Here’s what’ll really happen…

Iran’s Restrictions are Extensive – and Controversial

As we await a Trump decision on whether to continue the Iranian nuclear accord, the uncertainty is beginning to have an impact on oil’s pricing volatility.

The accord signed during the Obama administration is officially called the JCPOA. It was agreed upon in Vienna on July 14, 2015 after some 20 months of negotiations.

Signatories include the five permanent (and veto carrying) members of the UN Security Council (U.S., UK, France, China, Russia), Germany and the European Union (P5+1+EU) on the one hand, and Iran on the other.

Under JCPOA, Tehran agreed to eliminate its stockpile of medium-enriched uranium, reduce its store of low enriched uranium by 95 percent, and decrease the number of gas centrifuges for 13 years by some 67 percent.

Additionally, for a period of 15 years, JCPOPA states that Iran would do the following:

• Not enrich uranium beyond 3.67 percent, enough for energy use but well below weapons grade;

• agree to forego the building of any new heavy-water plants, essential to control nuclear reactions, over the same period, and

• limit enrichment to a single location employing first generation centrifuges for a period of 10 years.

In return, the P5+1+EU agreed to begin phasing out – subject to a sequence of verifications – economic and trading sanctions imposed by the U.N., the U.S., and the E.U.

However, during the 2016 presidential campaign Trump heavily criticized JCPOA and pledged to scrap the accord…

America Wants More from the Agreement

In President Trump’s view, matters not part of the agreement – such as Iranian support for global terrorism, continued development of ballistic missile programs, and support for enemies of Israel and Saudi Arabia in the Persian Gulf region – need to be added to the arrangement.

As a result, the White House announced in October of last year that it would not provide the periodic JCPOA certification as required under U.S. law.

However, the administration did not end the agreement.

This week, Israel released documents claiming that Iran has continued its nuclear program in violation of JCPOA. The presentation was less than compelling, including little tangible information about the post-accord environment.

Both the International Atomic Energy Agency (IAEA) and independent watchdog organizations have said that there is no evidence to support the contention that Iran is evading JCPOA. The IAEA has the responsibility under JCPOA to monitor Tehran’s compliance.

Now, my Iranian contacts were quick to note the obvious: Each of the new demands made by Washington are not part of what is covered by JCPOA.

“One does not revise an international arrangement after the fact to pander to one’s own internal politics,” a source in the Iranian National Oil Company said over the weekend.

There is also strong support from other permanent UN Security Council members, Germany, and the EU to continue the agreement.

Yet all other parties are very aware that JCPOA will not survive if the U.S. pulls out.

And neither will the current oil environment…

The Future without the JCPOA Is Bleak

The global pricing of crude oil is now feeling the impact of the politics swirling about Washington.

I expect that the current intent inside The Beltway is to develop evidence to support the Israeli claims. But there seems to be little leverage to accomplish such an objective, even if the administration can figure out what it wants to add.

This is an exceptionally dangerous play with no clearly identifiable upside beyond delivering on a campaign pledge and a few tweets.

Trump may have made a threat to scrap JCPOA a central theme for his political support base and has said that a better replacement is needed, but that development has a very low probability.

Throwing out JCPOA will certainly put Iran back into full weapons development with a corresponding rise in geopolitical uncertainty.

And there will be a direct impact on oil prices.

Renewal of U.S. sanctions will increase the cost of Iran’s crude exports, cut Tehran off from easy access to global banking and capital, and in all likelihood reduce the country’s predictable export volume.

These are factors that would contribute to an upward pressure on international global oil prices.

But there are other things to consider – factors that could be even stronger and ultimately drive prices in the other direction.

For one thing, Iran would certainly stop any pretense of abiding by the OPEC-Russia production cuts. That, in turn, would prompt defections by others.

Moreover, the enticement for a spike in production will be almost irresistible for U.S. companies – which are both the quickest sources of additional oil coming into the market, and the main source not subject to production caps.

But the main destabilizing factor emerges from the acceleration in volatility itself.

Any perception of additional security challenges in the Persian Gulf – and make no mistake, the end of JCPOA will heighten tensions between Iran and Saudi Arabia – will contribute to a near-term rise in global prices.

The resulting uncertainty will quickly give way to a widening application of competing short and long plays, which, in a whipsaw effect, will result in higher highs and lower lows in the oil price band and make genuine pricing determinations more difficult.

Ask any trader.

Predictability is more important than anything else. Ending JCPOA thrusts the Iranian factor into the center of the equation.

And that will not be a preferable development.

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When it comes to the recently passed $1+ trillion US fiscal stimulus, there are two opposing views in the market: one is that it was an unnecessary, ill-timed diversion, which the US economy with its near record low unemployment rate does not need, which will prompt a surge in inflation and will unleash a debt-funding crisis as the US Treasury is forced to sell record amounts of debt at every greater yields. This is the view typically held by those who are politically aligned against President Trump.

On the other hand, there are those who say the impact of US fiscal stimulus has been extremely visible in US business & consumer surveys (which have predicted >5% growth in real GDP) and together with tax reform, has been instrumental in send the S&P 35% higher since the Trump election. Supporters of president Trump tend to see more positives than negatives in the fiscal plan.

And yet, the reality is that to date US tax cuts have had little if any tangible impact on actual economic activity according to Bank of America economists. In a note released earlier today by BofA’s Michael Hartnett, the chief investment strategist highlights the following:

• US capital goods orders in the past 5 months are very surprisingly flat despite corporate tax cuts, record profits & stock prices (Chart 6); and there is no evidence of Make American Wages Great Again (wage growth stuck around 2.5%)

• The $1600 gain from tax cuts in 2018 for average US households (Brookings Institute) has thus far been saved (personal savings rate is up from 2.4% to 3.1%), used to reduce debt (42% of respondents BofAML’s US consumer survey said they plan to use the tax cut to “save” or “pay down debt”), or used to fund an extra $320 in gasoline bills (gasoline prices are up on average 16% this year)

However, no matter what one thinks of Trump or the ultimate relevance of the fiscal stimulus, a bigger concern – according to BofA – is that a “visible stimulus” will be critical in the coming months for two reasons:

• First, the blockbuster corporate earnings bonanza is coming to an end as BofA’s model suggests global EPS will slow from 20% to 6% in coming quarters as Asian export growth slows and global PMIs normalize, as predicted by the yield curve.

• Second, and far more important, is that both profit and economic growth is suddenly in jeopardy: according to Hartnett “South Korean export growth, a notoriously good global cyclical indicator, turned negative for 1st time since 2016.”

And, as a further reminder, the last time South Korean export growth turned negative in the downward direction was just around the time of China’s devaluation in the summer of 2015, when global markets were on the verge of a 20% bear market, and only the Shanghai Accord of February 2016 prevented a free fall in risk assets.

If the South Korean “advance indicator” is as accurate as it has always been, forget about soaring earnings for the coming quarters: an earnings recession is just around the corner!

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Authored by Tom Luongo,

While Israel has been the barking dog pushing hostilities against Iran, it is the Saudis that are truly most threatened by Iran’s return to the global economy.  They are as much, if not a bigger, agitator for tearing up the Iran Nuclear Deal as Israel has been.

A report earlier this week from the International Monetary Fund argued that Saudi Arabia still needs oil trading at $88 per barrel to balance its budget and pull off the structural reforms the country needs.

Crown Prince Mohammed bin Salman’s Vision 2030 plan, which has the usual suspects in Washington salivating at the prospect of leaching off of, will require a complete make-over of Saudi society.  It will likely cost trillions.  And the Saudis still have a big budget deficit.

It is set to shrink to a more manageable 7% of GDP this year while expanding government spending by more than 5%.

2018 Cuts the Deficit to 7.3% of GDP, thanks to $70/bbl Oil

And the only thing keeping this budget deficit moving lower is, of course, higher oil prices.  Last year’s breakeven point was just $70 per barrel. But that rises this year to $88 according to the IMF because Bin Salman has begun the spending associated with Vision 2030.

Now, since the implementation of the Iran Nuclear Deal (JCPOA) Iran’s oil output has risen back to its pre-sanctions level of around 3.8 million barrels per day.

Iran’s Oil Production Now Exceeds, on Average, it’s Pre-Sanctions Level in 2012

With new exploration and production deals signed by European, Chinese and Russian oil majors Iran’s output over the next few years could easily push over 4 million barrels if not closer to 5 million.

While at the same time Saudi Arabia wants to both cut back on production and its exports to raise the price per barrel to the level it needs.  So, it shouldn’t take a genius to see the incentive here to try and bribe President Trump with hundreds of billions in arms sales and promises of fighting Iran in Syria to get him to de-certify the JCPOA and have the deal fall apart.

U.S. Mob Rule

The Saudis, to some extent, are being shook down by Trump, Mafioso-style, for our nuclear shield.  In exchange for help bottling up Iran and raising oil prices the Saudis will have to spend a lot of their savings pump-priming the U.S. economy with new refineries in Texas and more planes to drop bombs on weddings.

You know, win/win.

If the Saudis need $88 per barrel oil then Iran has to have its output cut to offset the rising price per barrel.

With the reports that U.S. Green Berets are present on the battlefield in Yemen should tell you that the Trump Administration is uninterested in any outcome in the Middle East that doesn’t end with Iran’s capitulation to Israeli and Saudi (and therefore U.S.) needs and Russia and China’s humiliation for backing Iran.

The White House is fully staffed with people willing to commit or condone the worst human rights violations in Yemen and Syria in order to stop Iran.

The question is, “Stop Iran from what?”  The conventional answer from Trump and K-Street foreign policy ‘experts’ is, “Gaining a nuclear weapon.”  The real answer, however, is much simpler than that.

Iran will not be allowed to re-join the global economy as an independent actor.  That position will be maintained even if the theocracy is overthrown.  Because this supposed existential fight to the death between Saudi Arabia and Iran has little to do with religion and old enmities.

It has to do with oil.   Saudi Arabia wants Iran back to less than 3 million barrels a day to support higher prices.  Israel and the U.S. want to starve the Iranian government of money, so pulling out of the deal will allow the U.S. to re-impose sanctions on Iran, cutting it out of the global banking system again.

But Iran being back to pre-2012 production levels and removing the U.S. dollar from its oil trade officially means that China has a different partner to buy its oil from.  And that supports the fledgling petroyuan system developing in Shanghai financial markets.

The China Syndrome

Sinopec is set to curb imports of Saudi Oil another 40% this month citing inexplicable high prices from the Saudis during a time when a significant portion of Sinopec’s refineries are down for annual maintenance and other producers are happy to offer more for less to grab market share.

Last month, a Unipec official told Reuters, “Our refineries think these are unreasonable prices as they do not follow the pricing methodology.” Besides Sinopec, a source from another two refineries in northern Asia said they will be cutting their imports from Saudi Arabia by ten percent as oil buyers have a hard time grasping how the Kingdom is calculating the price for its most popular grade.

The price increase came as a surprise to the biggest market for crude in the world.

Aramco is pushing China at a time when it’s clear it has other options in the oil market and no longer wants to pay for oil in dollars.  Brazil’s imports to China have risen sharply.  Iran’s imports to India, tangentially related, are set to double this year to nearly 400,000 bbl/day.

Trump may want the Saudis, again mafioso-style, to raise its prices to get China to import U.S. oil as the Brent/WTI spread continues to widen, now over $6, to combat the U.S. trade deficit with China.  Not that that makes a lick of sense, but then again, Trump is a mercantilist, which also doesn’t make any sense.

So, at least its consistent.

U.S. production keeps surging and will continue for likely the rest of 2018 and beyond as new fracking techniques lengthen the production time of new wells, albeit at lower daily output.

So, even if rig counts fall, which they show no signs of doing, U.S. shale oil output will keep rising.  Brent output is falling, U.S. production is rising.  So, the Brent/WTI spread will continue to widen if new ‘markets’ aren’t opened up for U.S. shale producers.

This again, brings me back to the Iran Nuclear Deal being all about oil and not about bombs.  Ending the deal will allow Iran to restart its program which the conventional wisdom says they can spin up to a viable weapon within 18 months, quicker if its partner North Korea was successful in producing a viable warhead.

But, having removed Iran from the SWIFT financial payments network and seen Iran survive it, the threat of sanctions and SWIFT expulsion seem hollow. Both China and Russia have viable SWIFT alternatives and Iran has so few ties to both U.S. and European banking institutions after nearly a decade of hostilities.

Moreover, Turkey, who helped Iran survive without SWIFT in the past, is more than happy to stick it to the U.S. after its backing the Syrian Kurds.  In short, Iran has a lot more friends today than it did in 2012.

China and Russia are immensely stronger.  Israel and Saudi Arabia far weaker.  And that means that regardless of what Trump does on May 12th, the world is already prepared for the next steps.

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Submitted by Keith Dicker, Chief Investment Officer at IceCap Asset Management

It’s all a show

Hollywood has made a living ripping people’s faces right off their skull.

By many accounts, Tom Cruise has positioned himself as a professional face ripper. Whether he’s ripping and flipping his face off in Vanilla Sky, or doing his best imitation of hiding behind different faces in Mission Impossible – Tom Cruise’s film earnings have proved that a face ripping strategy can be very profitable.

Yet, the most famous face ripper is undoubtedly Hannibal Lecter. While his creepy movements, and his creepy speech was more than enough to give you the creeps, Lecter’s real power was revealed the moment he escaped using another (unfortunate) person’s face as a disguise.

Whereas Tom Cruise enjoyed his face-ripping experience, Hannibal Lecter’s victim certainly did not. In both cases, the face-ripping actions proved to be both memorable and shocking. Unknown to Hollywood, and unknown to most investors – the world is on the precipice of one of the biggest face-ripping market movements to be felt by the money world.

* * *

For many reasons, many people hate the USD. Debts, deficits, wars, Trump – you name it, the reasons for the USD to fall are too many to count. Yet, despite all the moaning and groaning about the USD – it just won’t go down. And in the investment world, what won’t go down – goes up.

IceCap expects the USD to rally hard. The potential for a surge will be so aggressive that it will rip the face off all investors who are bearish against the USD and positioned for it to fall. This is the real risk that faces the market today.

* * *

It’s Déjà Vu all over again

Well, we’ve been watching now for quite some time – and it still hasn’t happened. We’ve watched Canadian, British, Australian and even tolerated the big American ones too – yet most media outlet refuse, is prohibited, or simply doesn’t understand it enough to report to the masses the happenings within the world’s bond market. Yet, every single evening when the majority return home from their jobs, they inevitably turn to the TV to see what happened while they toiled away their day, earning money to tuck away for their eventual retirement.

Sadly, the largest investment market on the planet rarely gets a mention, a like, or even a tweet.

But it should.

Readers of the IceCap Global Outlook are fully aware of our expectations for a crisis in the bond market. The crisis will likely originate, from a re-escalation of a crisis in the Euro-zone. Cracks have started. Chills are beginning to be felt down spines.

And if you look close enough – you’ll soon see the days of the big banks, big media, and big consultants avoiding this big discussion are coming to an end.

The entire concept that there is a real person behind the investment account number has somehow disappeared over the years.

Instead, the investment industry has intensified its laser-like sharpness on miraculous products, lead by armies of glasses-wearing analysts scouring the world over in search of undiscovered opportunities.

Those that cannot see through this charade, will easily rationalise 100’s of banks, 1000’s of mutual funds, and 10,000’s of analysts as something that’s really cool and worthwhile paying 2% or more a year to experience.

Yet, others know that all these banks, mutual funds and analysts are all equipped with the same data, the same spreadsheets, the same software and the same bonus pool payout structure. Which should lead you to ask – how is it possible to do better than the average?

The answer of course – it isn’t.

Instead, the only way, and the easiest way, to truly protect your hard earned savings, grow your retirement funds, and ignore the headline news is actually rather simple. Do the opposite of what everyone else is doing. Being a contrarian in the investment world certainly isn’t a new and novel idea.

Yet, it’s incredibly difficult to do for several reasons. To start with – being a contrarian, means you will take active decisions within your investment portfolio which are quite different than what everyone else is doing.

Of course, being a contrarian doesn’t mean you should be stupid either. It just means you need to be mindful of the truths, the untruths, and most importantly – be aware of your surroundings. Achieving this starts with a rather novel concept – ignore the masses. And there’s no better way to ignore the masses, then to ignore the headline news regarding the stock market.

If the first four months of 2018 did anything to investors, it made them a little bit more honest with themselves. In many ways, the volatility waves and the losses generated were unbearable for most. For many, the first real losses in over a year can be hard to stomach. And despite acknowledging that stock markets can go down as well as up – the majority of investors react quite differently when this guaranteed event occurs.

By now, everyone should agree that all the euphoria experienced from gains, is dwarfed by the pain experienced from losses. In other words, the emotions earned from both gains and losses are not symmetrical.

Those that disagree, haven’t truly experienced a loss.

Which of course brings us to the current stock market correction.

As of writing, US stock markets are now flat for the year 2018. Yet, you would never know it from the headlines of the big media outlets, or worse still – the twitter feeds from those who have been calling for stocks to crash to zero.

In many ways, one can be forgiven for falling for the hysteria. Between trade wars, tax wars, and real wars – everyone will admit that perhaps the world is just a bit off kilter.

Yet, if one stepped way back and objectively assessed the entire situation – one would discover this trifecta of events has not materialized into the face-ripping market movements that sells papers and clicks. Granted, the world IS in a precarious state – IceCap has been writing and speaking about this in detail. But the challenge for investors remains – the majority continue to incorrectly assess the situation and therefore remain incorrect with their market expectations.

In other words – the majority are once again proving to be wrong. IceCap’s primary model for determining whether the stock market is about to turn into an abysmal collapse – has NOT flashed red.

Yes, the model signals have weakened over the last few months, but as of writing there isn’t anything happening to suggest we should begin to stock up on bottled water, duct tape and (heaven forbid) 10-year US Treasuries. From a technical perspective, our model tracks trend and momentum rate of change indicators covering sector/industry/sub-industry levels for multi-cap weighted indices.

The joke is on you

There are jokes. There are riddles. There are conundrums. And there is the Euro-zone. Sometimes when writing the IceCap Global Outlook, finding new investment themes can be tricky – but thankfully we have the Euro-zone, the European Union and everything else in between. It’s absolutely beyond us how anyone on planet Earth can say with a straight face that Europe is fixed and there is no risk of the European banking system and sovereign debt market imploding.

To be perfectly blunt:

• Most of the 19 countries in the Euro-zone haven’t had to borrow from real investors in years
• The entire sovereign debt bond market has been completely supported by money printing by the ECB, which means all bank regulatory capital is fragile
• Every political establishment party has lost SIGNIFICANT votes to non-political establishment parties
• Total bad loans in the Italian banking industry exceeds total equity in the Italian banking industry

IceCap cannot emphasize enough, that the Euro-zone will absolutely return to a re-escalation of their sovereign debt crisis. And once it begins, two things happen:

1. It snowballs VERY quickly
2. The negative effects on the bond market WILL spread around the world.

Yes, these are dire warnings. But the good news is that from a financial perspective, there are many ways to both protect your hard earned savings and even profit/grow your investment portfolios. Of course, those in Brussels and Frankfurt will tell you a completely different tale. Their stories begin with once upon a time, and weaves and bobs the readers to sleep with thoughts of financial integration and stability, safety and soundness of the banking system, and consistent supervision.

The European Central Bank and European Union websites are stuffed with beautiful and harmonious literary masterpieces. Yet, as soon as you take your head out of the sand and objectively look around, you’re hit with head shaking facts, figures and turns.

One of the worst kept secrets amongst those who care to look, is that the European banking system is absolutely stuffed to the gills with bad loans that banks absolutely refuse to write-off. This is especially true in Italy, and the reason the banks have not written off these band loans is due to the need to replace these losses with new investment capital.

Nearly 10 years ago, the Americans faced the exact same dilemma and their imperfect solution was for the US Treasury to directly invest in the banks by way of the TARP bailout.

For better or worse, the Americans wrote-off (most) of the losses and forced the banking system to recapitalize. In Europe, instead of writing off the bad loans and recapitalizing the banking system, they instead used the International Monetary Fund, World Bank, European Investment Bank, European Bank for Reconstruction and Development, Bilateral Loans, Loan Facilities, European Financial Stability Mechanism, European Financial Stability Facility, European Stability Mechanism, Longer Term Refinancing Operations I, Longer Term Refinancing Operations II, Zero Interest Rate Monetary Policies, Negative Interest Rate Monetary Policies and Quantitative Easing Monetary Policies to save the day.

The list is long. It’s exhausting. And the only people who gauge these programs as a success are those in Brussels, Frankfurt and other centers of government who have all profited in one way or another. Yes, this critique is harsh – and very un-European (or un-Canadian for that matter), but the truth sometimes hurts.

And the truth is, the ECB has tried extremely hard to right the ship. Yet, in addition to plain wrong and disastrous policies (ZIRP, NIRP, QE), other attempts to fix things have been completely rejected by various forms of governments. The latest one of course is the ECB’s plan for banks to write-off bad loans and raise new capital.

Loop to loop

When first announced, this was the newest plan to finally end the banking and debt crisis in Europe. Months later, the plan is completely dead on arrival due to the rejections by the banks themselves. European banks will tell you that there is no way possible for them to either write-off the loans, set aside capital to protect new loans, or attract new equity/regulatory capital from private investors.

Markets have noticed.

Over the last year, stocks of the biggest European banks have all declined significantly with the biggest, Deutsche Bank, having declined over -30%. The problem with Europe is that the doom loop exists and there is no way to break it. This doom loop involves the European Central Bank (ECB), the Italian Government, and Italian Banks.

The ECB prints money and sends it directly to the Italian Central Bank. The Italian Government borrows money by selling bonds to Italian Banks.

To complete the loop, the Italian Central Bank buys these bonds from Italian Banks. Wash, rinse, repeat. This same exercise exists for all Euro-zone countries including France, Spain, and even Germany.

It’s become a doom loop because in order to break the loop, private investors will have to step in to fill the gaps.

And private investors have a rather novel idea when it comes to investing – they either avoid risk, or of they do make a risky investment, they want to be paid appropriately for taking on this risk.

And with bond yields across the entire Euro-zone at all-time lows only because of the doom loop – why on earth would any rational private investor risk money by lending to Euro-zone sovereign states, or investing in Euro-zone banks?

For those still in disbelief, spend some time with the chart below.

There you will see how interest rates in Italy and Germany converged entering the creation of the Euro-zone. Then how they become locked together, and now how they are moving away from each other.

The only way to save the Euro-zone is to have these rates re-align. And the only way for this to occur is for both of the following to occur:
1) Germany must agree to assume liabilities for all debt across the Euro-zone,
2) All countries must agree to forfeit complete control over government finances of spending and taxation to Germany.

And considering not one, let alone both of the above will never occur – the default option is for the crisis to return.

And once it returns, it will look like this:

Putting this all together, one should be able to understand our expectation for many bond strategies/funds to perform poorly, and of equal importance – the USD to soak up foreign capital seeking safety from the bond market crisis and the resulting currency crisis. Remember – all bond markets are connected. The crisis in Europe will not be isolated to Europe.

Full presentation below:

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Authored by Jonathan Cook,

This is the moment when a newspaper claiming to uphold that most essential function in a liberal democracy – acting as a watchdog on power – formally abandons the task. This is the moment when it positively embraces the role of serving as a mouthpiece for the government. The tell is in one small word in a headline on today’s Guardian’s front page: “Revealed”.

When I trained as a journalist, we reserved a “Revealed” or an “Exposed” for those special occasions when we were able to bring to the reader information those in power did not want known. These were the rare moments when as journalists we could hold our heads high and claim to be monitoring the centres of power, to be fulfilling our sacred duty as the fourth estate.

But today’s Guardian’s “exclusive” story “Revealed: UK’s push to strengthen anti-Russia alliance” is doing none of this. Nothing the powerful would want hidden from us is being “revealed”. No one had to seek out classified documents or speak to a whistleblower to bring us this “revelation”. Everyone in this story – the journalist Patrick Wintour, an anonymous “Whitehall official”, and the named politicians and think-tank wonks – is safely in the same self-congratulatory club, promoting a barely veiled government policy: to renew the Cold War against Russia.

It is no accident that the government chose the Guardian as the place to publish this “exclusive” press release. That single word “Revealed” in the headline serves two functions that reverse the very rationale for liberal, watchdog-style journalism.

First, it is designed to disorientate the reader in Orwellian – or maybe Lewis Caroll – fashion, inverting the world of reality. The reader is primed for a disclosure, a secret, and then is spoon-fed familiar government propaganda: that the tentacles of a Russian octopus are everywhere, that the Reds are again under our beds – or at least, poisoning our door handles.

British diplomats plan to use four major summits this year – the G7, the G20, Nato and the European Union – to try to deepen the alliance against Russia hastily built by the Foreign Office after the poisoning of the former Russian double agent Sergei Skripal in Salisbury in March.

This – and thousands of similar examples we are exposed to every day in the discourse of our politicians and media – is the way our defences are gradually lowered, our critical thinking weakened, in ways that assist those in power to launch their assault on democratic norms. Through such journalistic fraud, liberal media like the Guardian and BBC – because they claim to be watchdogs on power, to defend the interests of the ruled, not the rulers – serve a vital role in preparing the ground for the coming changes that will restrict dissent, tighten controls on social media, impose harsher laws.

The threat is set out repeatedly in the Guardian’s framing of the story: there is a self-evident need for “a more comprehensive approach to Russian disinformation”; Moscow is determined “systematically to divide western electorates and sow doubt”; “the west finds itself arguing with Russia not just about ideology, or interests, but Moscow’s simple denial, or questioning, of what the western governments perceive as unchallengeable facts.”

Tom Tugendhat, son a High Court judge, a former army officer who was honoured with an MBE by the Queen in his thirties, and was appointed chair of the Commons’ important foreign affairs select committee after two years in parliament, sets out the thinking of the British establishment – and hints at the likely solutions. He tells the Guardian:

Putin is waging an information war designed to turn our strongest asset – freedom of speech – against us. Russia is trying to fix us through deception.

Second, there is a remedy for the disorientation created by that small word “Revealed”. It subtly forces the reader to submit to the inversion.

For the reasons set out above, a rational response to this front-page story is to doubt that Wintour, his editors, and the Guardian newspaper itself are quite as liberal as they claim to be, that they take seriously the task of holding power to account. It is to abandon the consoling assumption that we, the 99 per cent, have our own army – those journalists in the bastions of liberal media like the Guardian and the BBC – there to protect us. It is to realise that we are utterly alone against the might of the corporate world. That is a truly disturbing, terrifying even, conclusion.

But that sense of abandonment and dread can be overcome. The world can be set to rights again – and it requires only one small leap of faith. If Russian president Vladimir Putin truly is an evil mastermind, if Russia is an octopus with tentacles reaching out to every corner of the globe, if there are Russian agents hiding in the ethers ready to deceive you every time you open your laptop, and Russian cells preparing to fix your elections so that the Muscovian candidate (Donald Trump, Jeremy Corbyn?) wins, then the use of that “Revealed” is not only justified but obligatory. The Guardian isn’t spouting British and US government propaganda, it is holding to account the supremely powerful and malevolent Russian state.

Once you have stepped through this looking glass, once you have accepted that you are living in Oceania and in desperate need of protection from Eurasia, or is it Eastasia?, then the Guardian is acting as a vital watchdog – because the enemy is within. Our foe is not those who rule us, those who have all the wealth, those who store their assets offshore so they don’t have to pay taxes, those who ignore devastating climate breakdown because reforms would be bad for business. No, the real enemy are the sceptics, the social media “warriors”, the political activists, even the leader of the British Labour party. They may sound and look harmless, but they are not who or what they seem. There are evil forces standing behind them.

In this inverse world, the coming draconian changes are not a loss but a gain. You are not losing the rights you enjoy now, or rights you might need in the future when things get even more repressive. The restrictions are pre-emptive, there to protect you before Putin and his bots have not only taken over cyberspace but have entered your living space. Like the aggressive wars of “humanitarian intervention” the west is waging across the oil-rich areas of the Middle East, the cruelty is actually kindness. Those who object, those who demur, do so only because they are in the financial or ideological grip of the mastermind Putin.

This is the moment when war becomes peace, freedom becomes slavery, ignorance becomes strength.

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For most people born before the 90’s, a “3 1/2 inch floppy” was once a crucial part of their technological lives; securing and transporting important files and data. Of course nowadays, the 1.44 MB storage space is far from adequate and no new computers come equipped with an appropriate drive for the disks.

Little surprise then, as Statista’s Martin Armstrong notes, that the majority of children today have no idea what one is (despite the fact that ubiquitous software such as Word and Excel still use a floppy disk symbol for their ‘save’ buttons).

You will find more infographics at Statista

As a recent survey by YouGov has shown, 67 percent of the 6 to 18 year olds in the UK don’t know what a floppy disk is. Other essentially obsolete tech such as overhead projectors (once present in almost every classroom), and pagers were recognised even less.

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With Elon Musk’s public behavior becoming increasingly erratic, irrational and bizarre – just over the weekend trolling Warren Buffett that he is “super serious” about attacking Berkshire’s Candy moat, just hours after he threatened Tesla shorts with “unreal carnage” in a tweet that some have alleged is a violation of securities laws – the Tesla bears have been getting increasingly more vocal.

And it’s not just Jim Chanos: while the famous Exxon nemesis remains certain that Elon Musk’s resignation and Tesla’s doom  are just a matter of time, others have been just as vocal in their skepticism, so much so that Tesla is now the most shorted stock in the US market, much to Elon’s volatile chagrin.

Yet while most shorts believe there is at least some value in Elon Musk’s car company, Mark Spiegel of Stanphyl Capital Management is convinced that when the dust settles, Tesla will be “a zero” (whether or not Musk will be “bankwupt” is another matter). He made this clear rather early on, in fact on the front cover, of his 156 page slideshows that he delivered at the Kase Learning short selling conference.

While we present the whole powerpoint below, here is the exec summary and some of the bigger picture observations:

3 Broad Reasons Why The Equity in Tesla Is Worth “Zero”

1. Tesla’s financials are horrible and worsening even BEFORE massive competition begins arriving later this year
2. Tesla has no “moat” of any kind and in fact now possesses trailing technology in all facets of its business
3. A “bet on Elon” is a bet on someone who can’t be trusted -he has a long track record of making hugely misleading statements

A snapshot of the company’s current financials:

A look at Tesla’s financial “scale”:

But the key investment – or rather its opposite – highlight of Spiegel’s bear thesis is the same one we noted last week in Tesla’s “Other” Biggest Risk, namely the armada of electronic vehicles coming down the pipe, many of which are newer, more advanced, and generally cooler than Tesla and have the financial backing of auto giants which have billions in positive free cash flow which can fund the EV design and production process for years if not decades, a luxury the cash bonfire that is Tesla does not have. Here’s Spiegel:

A massive number of long-range electric cars will soon be on the market, often at prices subsidized by profits from their makers’ conventional vehicles, an option Tesla doesn’t have. Additionally, here in the U.S. Tesla’s $7500 tax credits will expire in late 2018 while competitors will just be starting to use theirs, so pricing pressure on Tesla will be intense. Here’s the competition Tesla faces in electric cars…

And then there is the biggest risk of all: Tesla’s constant need for more, new capital, which so far investors have been all too eager to provide to Tony Stark.

All this and more, including a debunking of Tesla’s “battery advantage” moat, its existing supercharger station “headstart”, Tesla’s autopilot safety record, its lac of preparedness to service its fleet, and much more in the full presentation below.

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Martin Shkreli’s reputation for lashing out at journalists, critics and (former) presidential candidates is once again coming back to haunt him.

The former Turing Pharmaceuticals CEO – who is currently serving a seven-year sentence at a minimum security “Club Fed” in New Jersey – is being sued by a former executive at Turing who is arguing that he repeatedly threatened her with firing, while also making false statements about her and sullying her good name, according to the Daily News.

“He undertook a campaign of harassment and character assassination against (Costopoulos), both internally via email, as well as publicly on social media platforms such as Facebook,” the lawsuit says.

Costopoulos argued that Shkreli he continued to exert his influence at Turing in his role as the company’s majority shareholder even after he was fired as CEO – despite being indicted on securities and wire fraud charges.

Ultimately, Costopoulos was fired in 2017, she says, because Shkreli was angry that he could no longer control the company’s management team. Costopoulos says she was singled out when executives at the company refused Shkreli’s demand to dial into company meetings. They also refused to make him a paid consultant of the firm.

In the lawsuit, Costopoulos compared Shkreli’s campaign of revenge with how he offered $5,000 to any fan who could grab one of Hillary Clinton’s hairs – a “threat” that prosecutors used to successfully revoke Shkreli’s bail.

“If an agency as powerful as the Secret Service voiced concern about Mr. Shkreli’s threat directed at Secretary Clinton, imagine the impact and distress that continuous threatening emails and Facebook posts had on Plaintiff, who did not have the benefit of any protection, let alone that of the United States Secret Service,” the lawsuit says.

Costopoulos says the only reason she was fired was because Turing’s board at the time was stacked with Shkreli loyalists.

To be sure, it’s unclear what, exactly, Costopoulos is seeking from this lawsuit. It’s widely believed that Shkreli has been effectively bankrupted by his legal troubles and several poor investment decisions that he made in the aftermath of the drug price-hiking scandal that first brought him to national attention.

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Via Greg Hunter’s USA Watchdog blog,

Two time best-selling book author Nomi Prins says the rescue policies of the 2008 financial crisis are still with us today. Prins is out with a brand new book called “Collusion: How Central Bankers Rigged the World.” 

The enormity of our current global debt problem is caused by central bankers.  Prins explains, “It is huge…

“The debt is between two and a half to three times global GDP, which is an historical high.  Debt to GDP throughout the developed world is higher than it has ever been, and it continues to grow.  Why?  Because money continues to be conjured up and rendered cheap for the participants at the top of the financial system.  The banks, the major corporations, the people who make money out of that, and it hasn’t washed down to the rest of the economy.  This is why most people feel this anxiety about another potential financial crisis, but also about what happens every day in their own pocketbooks. 

So, it is worse.  These central banks today, 10 years after the financial crisis occurred, that was supposed to be an emergency situation.  They have $21 trillion worth of conjured money in return for debt assets, stocks and corporate bonds around the world. 

If they pulled that plug, if they were to take down any of the $21 trillion, even a little bit . . . it would begin to create a major rupture in the financial system.  This is why I say the central banks are the market.  Without them, the markets would be nowhere near these highs. If they pulled their help and subsidies, the market would plummet really quickly.”  

Prins admits this has gone on for longer than most believed possible, but says it can’t go on forever. How does it all end?  Prins, who was a former top Wall Street banker, says,

“We will eventually get a crash because, at some point, the amount of quantitative easing, or conjured money to buy assets out of the market to pump up the…financial system, will come to this head where even though these major central banks are continuing to dump money in. 

There will be ruptures at the bottom of the economy . . . even though they are borrowing cheap money, they just can’t make enough money to service very cheap debt.  Consumers, who are at all-time debt highs, don’t have enough to continue to service their debt.  When these things happen at the same time in terms of lack of payments, delinquencies and defaults, then money will be taken out of the stock markets to plug the gap, and then the stock market comes down.  It will start with debt disintegrating, defaulting or having delinquencies…

The behavior that happens after this is the seizure of credit and lack of confidence everywhere.  When the cracks start, they will get bigger and bigger faster, and that’s when we have a crash.”

Will the next crash be worse than the last one? Prins says, “Yes, it will because we will be falling from a higher height. 

…The idea here is you are sinking on the Titanic as opposed to sinking on a canoe somewhere.  All of this artificial conjured money is puffing up the system, along with money that is borrowed cheaply is also puffing up the system and creating asset bubbles everywhere. 

So, when things pop, there is more leakage to happen.  The air in all these bubbles has created larger bubbles than we have had before.”

How does the common man protect himself? Prins says,

“They have to own things, and by that I mean real assets, hard assets like silver and gold.  That’s not as liquid, so taking cash out of banks and sort of keeping it in real things and keeping it on site . . . keeping cash physically.  You need to extract it from the system because the reality is when a financial crisis happens, banks close their doors to depositors. . . . Also, basically try to decrease your debt.”

Join Greg Hunter as he goes One-on-One with two-time, best-selling author Nomi Prins, who just released “Collusion: How Central Bankers Rigged The World.”

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