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In his forecasts for 2018, David Rosenberg, chief economist and strategist at Gluskin Sheff warned his clients – and our readers – that they should “enjoy the next 12 months” because contemporary market conditions, characterized by investor complacency, volatility, high valuations and a tight labor market, are eerily similar to 1988, 1999 and 2006 – years that immediately preceded major market reversals.

Given these similarities, Rosenberg concluded that “we are 90% through the current cycle” and advised that clients should focus on counter-cyclical companies with strong balance sheets…or consider deploying their money outside the US.

However, in a note to clients published Thursday, Rosenberg added that the Jerome Powell Fed could make a policy error that inadvertently sets the market up for a painful drop.

In his note, Rosenberg wondered whether the Fed will “remain a serial bubble blower.”

“The elephant in the living room remains the central banks,” Rosenberg wrote. “The prevailing view is that balance sheet tapering will be mild and that Jerome Powell will prove to be a dove. This may well be the most important psychological driver for the market — that a new and inexperienced Fed will not take the punchbowl away in the coming year.”

The Fed has been misguided, Rosenberg says, by its inflation target of 2% growth, which it has failed to reach despite a decade of historically accommodative policy. And investors have entered the year believing that the Fed will more or less stick to its projections (something that, in the past, it has proven unwilling to do).

 

David Rosenberg

But, as Bank of America highlighted earlier today, financial conditions are looser today than when the Fed starting reining in its post-crisis money printing program – despite the central bank hiking interest rates now fewer than six times.

With this in mind, Rosenberg worries that Powell could overreact and raise interest rates too quickly, causing the asset bubble in equities (and presumably bonds as well) to burst.

Earlier today, outgoing New York Fed Chairman William Dudley said something similar. The fact that monetary conditions have remained lax “suggests that the Federal Reserve may have to press harder on the brakes at some point over the next few years. If that happens, the risk of a hard landing will increase.”

Rosenberg admitted that GMO’s Jeremy Grantham “might be onto something” with a theory that he published yesterday in a research note of his own.

 

In it, Grantham posits that a cautious Fed could set the market up for a “late bubble surge” causing equity price gains to accelerate and the market to climb another 60% before valuations come crashing back to earth.

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Authored by Jim Rickards via The Daily Reckoning,

I’m calling 2018 “The Year of Living Dangerously.”

 

That description might seem odd to lot of observers. Major U.S. stock indexes keep hitting new all-time highs. 2017 went down as the first calendar year in which the Dow Jones industrial average was up for all 12 months.

Even in strong bull market years there are usually one or two down months as stocks take a breather on the way higher. Not last year. There’s been no rest for the bull; it’s up, up and away.

Inflation is tame, even too tame for the Fed’s liking. The unemployment rate is at a 17-year low. U.S. growth was over 3% in the second and third quarters of 2017, much closer to long-term trend growth than the tepid 2% growth we’ve seen since the end of the last recession in June 2009.

The U.S. is not alone. For the first time since 2007, we’re seeing strong synchronized growth in the U.S., Europe, China, Japan (the “big four”) as well as other developed and emerging markets.

Growth breeds growth as consumers in one country create demand for goods and services provided by another. This is what economists mean by “self-sustaining” growth instead of force-fed growth from easy money and government spending.

Technology rules the day. The pace of innovation is unprecedented in world history. Our daily needs are being fulfilled better, faster and cheaper by the likes of Amazon, Google, Netflix and Apple. We can share the good news on Facebook.

Best of all, the U.S. Congress and White House got around to cutting our taxes in late December!

In short, all’s right with the world.

Or not.

To understand why 2018 may unfold catastrophically, we can begin with a simple metaphor. Imagine a magnificent mansion built with the finest materials and craftsmanship and furnished with the most expensive couches and carpets and decorated with fine art.

Now imagine this mansion is built on quicksand. It will have a brief shining moment and then sink slowly before finally collapsing under its own weight.

That’s a metaphor. How about hard analysis?

Here it is:

Start with debt. Much of the good news described above was achieved not with real productivity but with mountains of debt including central bank liabilities.

In a recent article, Yale scholar Stephen Roach points out that between 2008 and 2017 the combined balance sheets of the central banks of the U.S., Japan and the eurozone expanded by $8.3 trillion, while nominal GDP in those same economies expanded $2.1 trillion.

What happens when you print $8.3 trillion in money and only get $2.1 trillion of growth? What happened to the extra $6.2 trillion of printed money?

The answer is that it went into assets. Stocks, bonds, emerging-market debt and real estate have all been pumped up by central bank money printing.

What makes 2018 different from the prior 10 years? The answer is that this is the year the central banks stop printing and take away the punch bowl.

The Fed is already destroying money (they do this by not rolling over maturing bonds). By the end of 2018, the annual pace of money destruction will be $600 billion.

The European Central Bank and Bank of Japan are not yet at the point of reducing money supply, but they have stopped expanding it and plan to reduce money supply later this year.

In economics, everything happens at the margin. When something is expanding and then stops expanding, the marginal impact is the same as shrinking.

Apart from money supply, all of the major central banks are planning rate hikes, and some, such as those in the U.S. and U.K., are actually implementing them.

Reducing money supply and raising interest rates might be the right policy if price inflation were out of control. But prices are actually falling.

The “inflation” is not in consumer prices; it’s in asset prices. The impact of money supply reduction and higher rates will be falling asset prices in stocks, bonds and real estate — the asset bubble in reverse.

The problem with asset prices is that they do not move in a smooth, linear way. Asset prices are prone to bubbles on the upside and panics on the downside. Small moves can cascade out of control (the technical name for this is “hypersynchronous”) and lead to a global liquidity crisis worse than 2008.

This will not be a soft landing. The central banks — especially the U.S. Fed, first under Ben Bernanke and later under Janet Yellen — repeated Alan Greenspan’s blunder from 2005–06.

Greenspan left rates too low for too long and got a monstrous bubble in residential real estate that led the financial world to the brink of total collapse in 2008.

Bernanke and Yellen also left rates too low for too long. They should have started rate and balance sheet normalization in 2010 at the early stages of the current expansion when the economy could have borne it (albeit without Dow 25,000). They didn’t.

Bernanke and Yellen did not get a residential real estate bubble. Instead, they got an “everything bubble.” In the fullness of time, this will be viewed as the greatest blunder in the history of central banking.

Not only that, but Greenspan left Bernanke some dry powder in 2007 because the Fed’s balance sheet was only $800 billion. The Fed had policy space to respond to the panic of 2008 with rate cuts and QE1.

Today the Fed’s balance sheet is $4 trillion. If a panic started tomorrow, the Fed’s capacity to cut rates is only 1.25% and its capacity to expand the balance sheet is nil, because the Fed would be pushing the outer limits of an invisible confidence boundary.

This conundrum of how central banks unwind easy money without causing a recession (or worse) is just one small part of a risky mosaic. I’ll be writing about the other pieces of the puzzle in future commentaries.

Here’s a sneak preview:

• Student loan debt is over $1.4 trillion, and default rates are over 20%. Most of these defaults have not yet hit the federal budget deficit. They will soon. Resulting bad credit ratings are standing in the way of jobs and household formation for an entire generation of millennials.

• The new U.S. tax bill is the greatest hoax since Orson Welles’ 1938 radio broadcast, “War of the Worlds,” about an invasion of Earth by Mars. Orson Welles caused a panic in the New Jersey/New York listening area, with people fleeing their homes and jamming the roads. The tax bill damage will be less visible but far more damaging.

Biggest winners: corporations and billionaires. Biggest loser: the U.S. economy. I’ll have a lot more to say about this in the weeks ahead. What is certain is the tax bill will add $2 trillion or more to the deficit, something the U.S. can ill afford.

• A catastrophic wave of emerging-market defaults is coming, with enormous spillover effects likely in developed economies. This will be worse than the Latin American defaults of the 1980s and the Asian-Russia defaults of the late 1990s. It will emerge from Turkey and Venezuela but won’t stop there

• A war is coming between the U.S. and North Korea, probably by this summer. The best case is that the U.S. wins but at a very high cost in lives and money. The worst case is World War III when China, Russia and Japan are drawn in due to the inevitable unforeseen consequences of war.

There’s more to come over the weeks ahead. For now, think of 2018 as the year of living dangerously.

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After several decades of nation-building and trillions of dollars missing or improperly recorded, the long-awaited audit of the U.S. Department of Defense (DoD) has finally begun. On Wednesday, the Defense Department Comptroller David Norquist told lawmakers in Washington that the DoD’s first-ever department wide audit will cost about $367 million in 2018 and an additional $551 million to fix the problems.

Norquist, who testified before the House Armed Services Committee, said Defense Secretary James N. Mattis and Deputy Defense Secretary Patrick M. Shanahan are in full support of the audit. Back in May 2017, President Trump appointed Norquist to finally put the military’s financial house back in order after many years of delays.

What is surprising, if only in retrospect, is that according to the World Economic Forum, U.S. Department of Defense has been named the largest employer in the world with some 3.2 million members on its payroll and $2.4 trillion in assets but has never administered a full audit. .

“This is the first time the department will undergo a full financial statement audit,”he said. “A financial statement audit is comprehensive and occurs annually and it covers more than financial management,” Norquist explained to Lawmakers.

The purpose of the audit will document military equipment and real property along with condition and location. “It tests the vulnerability of our security systems and it validates the accuracy of personnel records and actions,” Norquist said.

DoD News says that 1,200 auditors are currently working on the project to assess the books.

The department will have 1,200 financial statement auditors assessing the books and records to develop a true account of the state of the department, the comptroller said. It will take time to pass all the process and system changes necessary to pass the audit and get a so-called “clean opinion,” he said. He noted that it took the Department of Homeland Security — a much smaller and newer agency — 10 years to get a clean audit.

“But we don’t have to wait to see the benefits of a clean opinion,” Norquist said. “The financial statement audit helps drive enterprise improvements to standardize our business practices and improve the quality of our data.”

DoD News made an interesting observation how the audit will provide “information and accountability to the American people.” Why now? How come all of a sudden the DoD wants to become transparent to the American people? Perhaps, it is due to Washington’s two-decades of failed nation-building throughout the rest of the world, although it is unlikely.

Norquist said, “the taxpayers deserve the same level of confidence as a shareholder that DoD’s financial statement presents a true and accurate picture of its financial condition and operations. Transparency, accountability and business process reform are some of the benefits of a financial statement audit.”

And in a preview of what is to come, Norquist told the House Armed Services Committee that an initial Army audit found 39 UH-60 Black Hawk helicopter ($830,700,000) were not adequately recorded in the property system. “The Air Force identified 478 structures and buildings at 12 installations that were not in its real property system,” he added. In other words these helicopters were simply “missing” on the books.

 

Alas, the mismanagement within the DoD doesn’t stop there: in a recent report, the U.S. military lost some 44,000 troops across the globe in a country location labeled as “Unknown.”

Going even deeper into the rabbit hole, Mark Skidmore, a Professor of Economics at MSU specializing in public finance, found the Department of Defense and Housing & Urban Development may have spent as much as $21 trillion on mysterious items between 1998 and 2015.

“This is incomplete, but we have found $21 trillion in adjustments over that period. The biggest chunk is for the Army. We were able to find 13 of the 17 years and we found about $11.5 trillion just for the Army,” Skidmore said.

Considering that today’s already known accounting blunders at the Department of Defense are no small matter, we wonder what the 1,200 auditors will find when they perform the first ever dive down the rabbit hole of decades of failed proxy wars, regime changes and dictator slush funds in history?

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Authored by Pam Martens and Russ Martens via WallStreetOnParade.com,

The arrogance of the captured Wall Street regulators in Washington grows exponentially with each passing day.

 

The only Wall Street bank which has admitted to three criminal felony charges – all coming within the past three years – has been allowed to send one of its trading executives to head a key post at Wall Street’s top cop – the Securities and Exchange Commission (SEC). Failing up continues to be the business model in the nation’s capitol.

The Trump administration, in its continuing Swamp-filling mandate from the billionaires behind the dark curtain, has elevated Brett Redfearn as Director of the Division of Trading and Markets at the SEC. Redfearn has worked at JPMorgan Securities from November 2004 to October 2017 when he was named to the new SEC post.

In 2014 the U.S. Justice Department slapped JPMorgan with two criminal felony counts related to its banking relationship with Ponzi schemer Bernie Madoff. JPMorgan admitted to the charges and received a deferred prosecution agreement.

On January 7, 2014, FBI Assistant Director-in-Charge George Venizelos had this to say about the criminal charges: “J.P. Morgan failed to carry out its legal obligations while Bernard Madoff built his massive house of cards. Today, J.P. Morgan finds itself criminally charged as a consequence. But it took until after the arrest of Madoff, one of the worst crooks this office has ever seen, for J.P. Morgan to alert authorities to what the world already knew. In order to avoid these types of disasters in the future – we all need to be invested in making our markets safer and more equitable. The FBI can’t do it alone. Traders, compliance officers, analysts, bankers, and executives are the gatekeepers of the financial industry. We need their help protecting our markets.”

When the Madoff criminal charges went down, Redfearn held the position of Head of Market Structure Strategy for the Americas at JPMorgan. He was in that position for five years and nine months according to his LinkedIn profile, meaning that he could have or should have heard the rumors all over The Street that Madoff was running a Ponzi scheme while his own bank was handling the primary business account for Madoff for decades without seeing any of the tens of billions of dollars leaving the account going to pay for the options trades that Madoff was supposed to be doing for his clients. According to prosecutors, Madoff never actually made any trades for his clients but simply issued fake client statements showing the trades. (See our full report: JPMorgan and Madoff Were Facilitating Nesting Dolls-Style Frauds Within Frauds.)

One year after the Madoff-related felony counts were filed against JPMorgan, it admitted to yet another criminal felony count filed by the U.S. Justice Department for its involvement in the rigging of foreign currency trading. In addition to the Justice Department’s charges, the U.K.’s Financial Conduct Authority (FCA) detailed a wide scale breakdown of management failures and risk controls and stated that JPMorgan’s front office was actually “involved in the misconduct.” The FCA wrote:

“Pursuant to its three lines of defence model, JPMorgan’s front office had primary responsibility for identifying, assessing and managing the risks associated with its G10 spot FX [foreign exchange] trading business. The front office failed adequately to discharge these responsibilities with regard to the risks described in this Notice. The right values and culture were not sufficiently embedded in JPMorgan’s G10 spot FX trading business, which resulted in it acting in JPMorgan’s own interests as described in this Notice, without proper regard for the interests of its clients, other market participants or the wider UK financial system. The lack of proper controls by JPMorgan over the activities of its G10 spot FX traders meant that misconduct went undetected for a number of years. Certain of those responsible for managing front office matters were aware of and/or at times involved in the misconduct.”

Another trading fiasco that raises serious questions about the SEC’s selection of a trading executive from JPMorgan to serve in a Federal watchdog capacity is the 2012 “London Whale” scandal. JPMorgan was using hundreds of billions of dollars of deposits from its insured depository bank, Chase, to allow traders in its London office to trade in exotic, high risk derivatives. As a result of the crazy bets, JPMorgan Chase lost at least $6.2 billion, paid over $1 billion in fines, and was pummeled in a 306-page report from the U.S. Senate’s Permanent Subcommittee on Investigations. Senator Carl Levin, Chair of the Subcommittee at the time, said JPMorgan “piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.”

Americans will not likely draw comfort that a long-term executive from a Wall Street bank with this kind of history is policing trading on Wall Street.

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U.S. Immigration agents executed surprise pre-dawn raids on around 100 7-eleven stores across the country Wednesday, administratively arresting 21 people on suspicion of being in the U.S. illegally in a national effort to ensure businesses are hiring employees who are legally allowed to work in the country.

 

 

“Today’s actions send a strong message to U.S. businesses that hire and employ an illegal workforce: ICE will enforce the law, and if you are found to be breaking the law, you will be held accountable,” said ICE Deputy Director Thomas D. Homan, adding “Businesses that hire illegal workers are a pull factor for illegal immigration and we are working hard to remove this magnet. ICE will continue its efforts to protect jobs for American workers by eliminating unfair competitive advantages for companies that exploit illegal immigration”

The arrests stem from a 4-year-old case against Long Island and Virginia  7-11 franchises, and may lead to fines or criminal charges over hiring practices. 

Farrukh Baig, 57, and Bushra Baig, 49, a married couple who owned, co-owned or controlled 12 of the 7-11 franchise stores located on Long Island and in Virginia; Zahid Baig, 52, and Shannawaz Baig, 62, Farrukh Baig’s brothers who helped to manage and control the stores; and Malik Yousaf, 51, Tariq Rana, 34, and Ramon Nanas, 49. Brothers Ahzar Zia, 49, and Ummar Uppal, 48, indicted separately, owned and controlled two other Suffolk County 7-11 franchise stores.

Through this scheme, the defendants allegedly hired dozens of illegal aliens, equipped them with more than 20 identities stolen from U.S. citizens, housed them at residences owned by the defendants and stole substantial portions of their wages. If convicted, the defendants face 20 years in prison on wire fraud conspiracy and alien harboring charges, as well as multiple counts of aggravated identity theft, which carries a mandatory, consecutive two-year term of incarceration. –ICE.gov

Wednesday’s raids took place in California, Colorado, Delaware, Florida, Illinois, Indiana, Maryland, Michigan, Missouri, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, Washington state, and Washington, D.C.

The HSI investigation and service of notices of inspection was meant as a follow-up to a company-wide problem that was discovered in 2013.

Five years ago, the agency arrested nine franchise owners and managers for conspiring to commit wire fraud, stealing identities, and concealing and harboring illegal immigrants employed at 7-Eleven stores.

“Today’s service of NOIs throughout the United States serves as a follow-up to ensure the company has taken the proper steps towards more responsible hiring and employment practices,” the agency added.

The 7-11 raids were conducted a little over a week after Washington State filed suit against Motel 6 for training its employees to regularly hand over information on thousands of guests to immigration officials looking for people with “Latino-sounding names,” most of which was done without a warrant.

 

It was not isolated to two motels in Phoenix, not by a long shot. The company’s actions were methodical. They trained their new employees on how to do this,” Ferguson said. “We’re going to find out who at Motel 6 knew what, and when they knew it.”

He said the names of “many thousands” of Washington residents and visitors staying at Motel 6 had been turned over to the federal government “without their knowledge, without their consent.”

Ferguson said Motel 6 staffers told investigators that “the ICE agents circled any Latino or Latina-sounding names on the guest registry, and returned to their vehicles” to run background checks. –LA Times

 

Motel 6 – with over 1,400 locations in North America, disavowed the practice, saying that the information was handed over at “the local level without the knowledge of senior management.” 

Ferguson’s lawsuit, filed Wednesday in King County Superior Court, accuses Motel 6 of racial discrimination, unfair and deceptive business practices, and violations of Washington state privacy laws.

 

 

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Via SilverDoctors.com,

It’s no secret that Russia has been stacking the shiny phyzz for years, and here’s a glimpse showing exactly how they stack…

Source: English Russia

Photos from main gold storage of Central Bank of Russia.

Almost 1800 tons of gold is stored here.

Russia is number six in the world by gold storage.

 

Today Russia’s gold is 17% of world’s gold.

 

However ten years ago Russia had only 3% share of the total world gold storage.

 

And this is how all this gold is being stored.

 

 

 

 

 

 

 

 

 

 

 

 

 

What’s perhaps most interesting about these images is Russia’s willingness to release them now to the public.

One wonders how long before China shows its gold holdings too?

 

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After passing the Trump tax cuts late last year, the White House revealed that immigration, welfare reform and the administration’s nascent infrastructure plan would be its top priorities in 2018.

And while lawmakers say they’re close to a tentative immigration compromise to preserve DACA protections by packaging them with a border-security package that will presumably include some funding for the president’s promised border wall, the White House is already starting its crackdown on Medicaid.

To wit, the administration issued guidance early Thursday that will force people trying to collect Medicaid that they are working, or preparing to work. The policy change, according to the Washington Post, is the biggest blow to Medicaid in the program’s 50-year history.

However, it’s widely expected that any attempts to implement this policy will be met with a court challenge by the states, which administer Medicaid, and advocacy groups.

To be sure, 10 states are already lined up to adopt the new policy. They’re just waiting for federal permission to impose work requirements on able-bodied adults in the medicaid program.

 

Furthermore, three other states are contemplating them. Health officials could approve the first waiver – probably for Kentucky – as soon as Friday, according to two people with knowledge of the process.

As WaPo explains, the trend of imposing limits on Medicaid began two decades ago when a system of unlimited cash assistance was replaced by the Temporary Assistance for Needy Families.

The guidance represents a fundamental and much-disputed recalibration of the compact between the government and poor Americans for whom Medicaid coverage provides a crucial pathway to health care.

The idea of conditioning government benefits on “work activities” was cemented into welfare more than two decades ago, when a system of unlimited cash assistance was replaced by the Temporary Assistance for Needy Families with its work requirements and time limits. The link between government help and work later was extended to anti-hunger efforts through the Supplemental Nutrition Assistance Program, as food stamps are now called.

But most health policy experts, including a few noted conservatives, have regarded the government insurance enabling millions of people to afford medical care as a right that should not hinge on individuals’ compliance with other rules.

Despite promising during the campaign to leave Social Security, Medicaid and Medicare untouched, Trump has more recently signaled that he would seek to limit access to benefits for a program that was adopted as part of President Lyndon Johnson’s Great Society programs.

That tone was cemented in March when the newly sworn in administrator of the Centers for Medicare and Medicaid Services, Seema Verma, dispatched a letter to governors encouraging “innovations that build on the human dignity that comes with training, employment and independence.”

Government lawyers cautioned that they would need time to establish a legal justification for the new requirements that could withstand a court challenge. Apparently, the prevailing view adopted by conservatives is that working “promotes good health” which they can use to justify that this policy change would “further the objectivs” of Medicaid.

The legal issue is that states must obtain federal permission to depart from Medicaid’s usual rules, using a process known as “1115 waivers” for the section of the law under which the program exists. To qualify for a waiver, a state must provide a convincing justification that its experiment would “further the objectives” of Medicaid.

Unlike the 1996 rewrite of welfare law, which explicitly mentions work as a goal, Medicaid’s law contains no such element, and critics contend rules that could deny people coverage contradict its objectives. To get around this, the 10-page letter argues that working promotes good health and repeatedly asserts that the change fits within the program’s objectives. The guidance cites research that it says demonstrates people who work tend to have higher incomes associated with longer life spans, while those who are unemployed are more prone to depression, “poorer general health,” and even death.

“[A] growing body of evidence suggests that targeting certain health determinants, including productive work and community engagement, may improve health outcomes” the letter says. “While high-quality health care is important for an individual’s health and well-being, there are many other determinants of health.”

If the first approvals are issued this week, expect the first court challenges to arrive immediately after.

“This is going to go to court the minute the first approval comes out,” predicted Matt Salo, executive director of the National Association of Medicaid Directors.

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While a bipartisan senate group had reportedly reached an “agreement in principle” on DACA, as well as packaging immigration reform in order to avoid a government shutdown next Friday, things took another turn for the bizarre, when the WaPo reported that Trump “grew frustrated with lawmakers Thursday in the Oval Office when they floated restoring protections for immigrants from Haiti, El Salvador and African countries” as part of the proposed deal.

“Why are we having all these people from shithole countries come here?” Trump burst out, referring to African countries and Haiti. Instead, he suggested that the United States should instead bring more people from countries like Norway.

The comments left lawmakers “taken aback.”

Sens. Lindsey O. Graham (R-S.C.) and Richard J. Durbin (D-Ill.) proposed cutting the visa lottery program by 50 percent and prioritizing countries already in the system, a White House official said.

As reported earlier, the administration announced this week that it was removing the protection for over 200,000 citizens from El Salvador; meanwhile, as part of a potential bipartisan deal, lawmakers discussed restoring protections for countries that have been removed from the temporary protected status program while adding $1.5 billion for a border wall and making changes to the visa lottery system.

And, as so often happens, what was until noon a tentative deal, exploded in the afternoon when Trump changed his mind:

Trump had seemed amenable to a deal earlier in the day during phone calls, aides said, but shifted his position in the meeting and did not seem interested.

As a result, what was until just hours ago a done deal, is now in tatters.

Graham and Durbin thought they would be meeting with Trump alone and were surprised to find immigration hard-liners such as Rep. Bob Goodlatte (R-Va.) and Sen. Tom Cotton (R-Ark.) at the meeting. The meeting was impromptu and came after phone calls Thursday morning, Capitol Hill aides said.

After the meeting, Marc Short, Trump’s legislative aide, said the White House was nowhere near a bipartisan deal on immigration.

“We still think we can get there,” White House press secretary Sarah Huckabee Sanders said at the daily White House news briefing.

Or maybe not, in which case a government shutdown may be inevitable.

Oh, and as for the White House, it refused to deny that Trump said it.

And the WH does not deny POTUS “sh*thole” comments. http://pic.twitter.com/GRraWOt35d

— Jim Sciutto (@jimsciutto) January 11, 2018

And yes, for those wondering, “shithole” is now trending

Now trending: shithole.

— Glenn Kessler (@GlennKesslerWP) January 11, 2018

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Many others had done it, but nobody quite as blatantly as beverage maker Long Island Iced Tea Corp, which in late December, bizarrely but profitably changing its name to Long Blockchain Corp, which sent its shares soaring by 500%.

In an ironic twist, we previewed LTEA’s hilarious “pivot” just one day earlier when – discussing a similar surge in microcap stock Net Element – we said:

Now that it is abundantly clear that for a stock to explode higher, all that is necessary – and sufficient – is a press release mentioning the company’s name and throwing in the word “blockchain” in the same sentence (see Riot Blockchain and LongFin Corp), other public microcaps have decided that if that’s all it takes, then by all means they will gladly take investors’ money.

Indeed, as the value of Bitcoin has skyrocketed in recent months, companies previously focused on making fitness apparel, bras, cigars and beverages (and many other unrelated things) have rebranded themselves as virtual currency or blockchain companies of one sort or another. In this light, what Long Island Ice Tea Blockchain did was the culmination of what to many is clear mania behavior, as many obscure companies have pivoted operations or simply changed their names to cash-in on the cryptocurrency wave, a trend reminiscent of the dotcom boom. As profiled previously, a barrage of companies have seen their shares sky-rocket, largely on words such as “crypto” or “blockchain” in their names.

And investors cheered them on, pushing their stock prices up, forcing countless microcaps to ride the “Blockchain train”

Then, this week it was Kodak’s turn, which seeking to capitalize on the euphoria, announced the launch of Kodakcoin, “a photocentric cryptocurrency to empower photographers and agencies to take greater control in image rights management.”

It didn’t really make much sense, but it was enough for investors to send the price of KODK stock soaring over 300% two days after the announcement – which means investors had a full day to digest the news and still keep buying.

And now, none other than Jeff Gundlach, who earlier this week went out on a limb and predicted that the high for bitcoin is in, and then went out on an even bigger limb predicting that “if you short bitcoin today, you’ll make money.”

Or maybe not, because as even Gundlach admitted on twitter moments ago, the blockchain euphoria appears nowhere close to ending.

“Kodak rose >250% on “Blockchain pivot”! I should change my firm’s name to “DoubleBlockchain” and the bid would go up double 250% or 5 times! Gundlach tweeted.

Kodak rose >250% on “Blockchain pivot”! I should change my firm’s name to “DoubleBlockchain” and the bid would go up double 250% or 5 times!

— Jeffrey Gundlach (@TruthGundlach) January 11, 2018

Hardly something a person would say if the euphoria wave was anywhere close to coming to an end.

And in an oddly defensive tweet to follow up, Gundlach then address Jim Cramer, asking him “what again was my call on Bitcoin when I was on your network December 13?”

Hey, Jim Cramer, what again was my call on Bitcoin when I was on your network December 13?

— Jeffrey Gundlach (@TruthGundlach) January 11, 2018

We’ll assume it was to buy.

And yes, for now shorting bitcoin may have proven profitable thanks to the latest fireworks out of South Korea, but every single time the crypto space has tumbled, it has only rebounded that much higher. Will this time be different, and will Gundlach’s bitcoin call be as prescient as his forecast that Trump will be the next president.

For the answer, keep an eye on events in South Korea and Japan in the coming days: the two countries that can make or break the entire $700 billion cryptospace with the flip of a switch.

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Having called North Korea’s leader a ‘maniac‘, a ‘bad dude‘, mocked him as ‘short and fat‘, and referred to him repeatedly as ‘rocket man‘, President Trump told The Wall Street Journal that “I probably have a very good relationship with Kim Jong Un.“

Mr. Kim is hardly innocent in the exchanges as he previously warned he would “tame the mentally deranged U.S. dotard with fire,” referring to Mr. Trump.

In a wide-ranging interview, Trump suggested he has developed a positive relationship with North Korea’s leader despite their mutual public insults, signaling a possible new openness to diplomacy after months of escalating tensions over the rogue state’s nuclear program.

“I have relationships with people. I think you people are surprised.”

Asked if he’s spoken with Mr. Kim, Mr. Trump said: ”I don’t want to comment on it. I’m not saying I have or haven’t. I just don’t want to comment.”

Mr. Trump framed his own comments as part of a broader strategy.

“You’ll see that a lot with me,” he said about combative tweets, “and then all of the sudden somebody’s my best friend. I could give you 20 examples. You could give me 30. I’m a very flexible person.”

As WSJ notes, it’s been a decade since the U.S. engaged in formal talks with North Korean officials. Those “six-party talks” over North Korea’s nuclear ambition, which included South Korea, Japan, China and Russia, stalled in 2009 in disputes about North Korean nuclear and missile activity.

Since then, diplomats say, there have been messages transmitted back and forth through unofficial channels, including “Track 2” talks in which former U.S. officials and Korea experts have met informally with North Korean officials. But those talks don’t amount to official diplomatic communications. In October, Secretary of State Rex Tillerson said, without elaborating, that “we have lines of communication to Pyongyang—we’re not in a dark situation, a blackout.”

Mr. Trump has vacillated between seeming open to – and even eager for – diplomacy with North Korea, and dismissing the need or value for it, telling Mr. Tillerson that he is “wasting his time trying to negotiate with Little Rocket Man.”

In the interview, Mr. Trump praised China for help pressuring North Korea to end its nuclear problem, while adding “they can do much more.”

Interestingly, as Trump appeared to extend an olive branch of diplomacy – perhaps in reaction to China threats on US Treasury purchases – Russian President Vladimir Putin said on Thursday that North Korean leader Kim Jong Un was “shrewd and mature” and had won the latest standoff with the West over his nuclear and missile programs.

“I think that Mr Kim Jong Un has obviously won this round. He has completed his strategic task: he has a nuclear weapon, he has missiles of global reach, up to 13,000 km, which can reach almost any point of the globe,” Putin told Russian journalists at a televised meeting.

“He is already a shrewd and mature politician,” Putin said.

All of which follows ‘seemingly successful’ talks between North and South Korea that enabled the North to attend the imminent Winter Olympics in Pyongyang, a move that Mr. Trump said “sends a good message to North Korea.”

Trump ended the interview in his typical hyperbolic manner, reflecting on the fact that Pyongyang may be trying to separate Washington and Seoul, saying that…

“The difference is I’m president, other people aren’t,” he said. “And I know more about wedges than any human being that’s lived.”

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