Category: zerohedge

Authored by Andrew Korybko via Oriental Review,

There would be far-reaching implications for the US if the incoming Mexican government goes through with the current Defense Minister’s suggestion to legalize opium for medicinal use…

This so-called “solution” has long been discussed and is seen by some as a pragmatic approach for lessening the heavy carnage caused by the country’s drug war over the past decade, which has killed more than 200,000 people since it first began in 2006.

The concept is simple enough and it’s that the country’s opium farmers, which have made Mexico the world’s third-largest supplier of this drug, would sell their harvests to government-approved entities for use in scientific studies and medicine instead of giving them to the cartels, though this would require that the state provide adequate protection to both the farmers and their crops. This is a lot easier said than done because the security services are thought to be deeply infiltrated by the cartels, and many citizens live in fear of what would happen if these forces found out that they were cooperating with the government.

Mexico would therefore probably have to go through with what President-elect Andres Manuel Lopez Obrador, popularly known by his initials as AMLO, previously proposed in calling for a ceasefire with the cartels and even bestowing amnesty on non-violent members of these gangs in order to restore national stability. For as risky of a policy as it may be, it’s not impossible for it to succeed to the benefit of most Mexicans as a whole, though that doesn’t mean that it would also be in the US’ national interests to see this plan unfold.

The country has been so ravaged by the collateral damage caused by the rampant use of hard drugs within its society, which includes crime waves and overdoses, that the legalization of opium for medicinal use in Mexico might make its drug crisis many orders of magnitude worse if there aren’t proper border security measures in place beforehand.

Unless Mexico is successful in purging its security forces and the state in general of the cartels’ pernicious influence, which is highly unlikely, then the US’ southern neighbor will practically transform into one of America’s greatest Hybrid War threats overnight if this legalization proposal is ever implemented.

The expected large-scale export of opium or its manufactured heroin product from Mexico into the US would ravage local communities even more than they already are and could contribute to the drug being even more easily and cheaply available than ever before, thus leading to more addictions that people will have to battle for the rest of their lives, to say nothing of the consequent crime wave that might follow. There’s simply no way that legalizing opium for any purposes in Mexico is good for the US’ so-called “soft security” if its southern neighbor remains totally corrupt and strict border security isn’t in place.

It can therefore be expected that the US will either pressure Mexico to keep opium cultivation illegal or will try to find a way to shield itself from the catastrophic consequences if this happens.

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On Oct. 2, the day Jamal Khashoggi disappeared into the Saudi consulate in Istanbul, never to be seen or heard from again, his translator submitted a column about deteriorating press freedoms in the Arab world to the Washington Post’s global opinions editor. In the eerily prescient column, the writer outlines the collapse of press freedoms across the Arab world during the post-Cold War era, when governments have worked to suppress – sometimes financially, sometimes violently – dissident journalists and opposition voices. Because of this censorship, Khashoggi claims, Arab citizens have been left in the dark, unable to accurately assess matters that affect them and the broader world in which they live.

Even countries that have historically boasted a high degree of press freedoms – like Lebanon, for example – have fallen sway to polarizing influences. And when strongmen like Egypt’s al-Sisi or MbS shutter printing presses and arrest journalists, the outcry in the West is brief and muted – if these events even register.

When the Arab Spring erupted in 2011, Arabs briefly hoped that they would soon live in more open societies. But the brutal crackdown that followed has left these ambitions mostly unfulfilled. Instead, Arab leaders, intent on preserving the “old order”, increasingly see press freedoms as a threat to their rule.

This last point has been infinitely amplified by his death. Khashoggi, as WaPo points out, was martyred for press freedom.

The only question now is will the outrage provoked by his suspected killing at the hands of Saudi agents lead to tangible change?

Read the full op-ed below:

I was recently online looking at the 2018 “Freedom in the World” report published by Freedom House and came to a grave realization. There is only one country in the Arab world that has been classified as “free.” That nation is Tunisia. Jordan, Morocco and Kuwait come second, with a classification of “partly free.” The rest of the countries in the Arab world are classified as “not free.”

As a result, Arabs living in these countries are either uninformed or misinformed. They are unable to adequately address, much less publicly discuss, matters that affect the region and their day-to-day lives. A state-run narrative dominates the public psyche, and while many do not believe it, a large majority of the population falls victim to this false narrative. Sadly, this situation is unlikely to change.

The Arab world was ripe with hope during the spring of 2011. Journalists, academics and the general population were brimming with expectations of a bright and free Arab society within their respective countries. They expected to be emancipated from the hegemony of their governments and the consistent interventions and censorship of information. These expectations were quickly shattered; these societies either fell back to the old status quo or faced even harsher conditions than before.

My dear friend, the prominent Saudi writer Saleh al-Shehi, wrote one of the most famous columns ever published in the Saudi press. He unfortunately is now serving an unwarranted five-year prison sentence for supposed comments contrary to the Saudi establishment. The Egyptian government’s seizure of the entire print run of a newspaper, al-Masry al Youm, did not enrage or provoke a reaction from colleagues. These actions no longer carry the consequence of a backlash from the international community. Instead, these actions may trigger condemnation quickly followed by silence.

As a result, Arab governments have been given free rein to continue silencing the media at an increasing rate. There was a time when journalists believed the Internet would liberate information from the censorship and control associated with print media. But these governments, whose very existence relies on the control of information, have aggressively blocked the Internet. They have also arrested local reporters and pressured advertisers to harm the revenue of specific publications.

[Read Khashoggi’s last column for The Post before his disappearance in Arabic]

There are a few oases that continue to embody the spirit of the Arab Spring. Qatar’s government continues to support international news coverage, in contrast to its neighbors’ efforts to uphold the control of information to support the “old Arab order.” Even in Tunisia and Kuwait, where the press is considered at least “partly free,” the media focuses on domestic issues but not issues faced by the greater Arab world. They are hesitant to provide a platform for journalists from Saudi Arabia, Egypt and Yemen. Even Lebanon, the Arab world’s crown jewel when it comes to press freedom, has fallen victim to the polarization and influence of pro-Iran Hezbollah.

The Arab world is facing its own version of an Iron Curtain, imposed not by external actors but through domestic forces vying for power. During the Cold War, Radio Free Europe, which grew over the years into a critical institution, played an important role in fostering and sustaining the hope of freedom. Arabs need something similar. In 1967, the New York Times and The Post took joint ownership of the International Herald Tribune newspaper, which went on to become a platform for voices from around the world.

My publication, The Post, has taken the initiative to translate many of my pieces and publish them in Arabic. For that, I am grateful. Arabs need to read in their own language so they can understand and discuss the various aspects and complications of democracy in the United States and the West. If an Egyptian reads an article exposing the actual cost of a construction project in Washington, then he or she would be able to better understand the implications of similar projects in his or her community.

The Arab world needs a modern version of the old transnational media so citizens can be informed about global events. More important, we need to provide a platform for Arab voices. We suffer from poverty, mismanagement and poor education. Through the creation of an independent international forum, isolated from the influence of nationalist governments spreading hate through propaganda, ordinary people in the Arab world would be able to address the structural problems their societies face.

 

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Two days after Missouri Senator McCaskill was exposed by Project Verita s as being considerably more liberal – “essentially the same as [Obama’s]” – that she would like her moderate voters to know, issued a demand for an investigation into the fraud she says Project Veritas committed in the making of a series of “sting” videos of her re-election campaign.

After an initial outright denial, McCaskill has claimed since the videos were released that she now remembers someone taking video and trying to get her to make statements on camera that were at odds with her actual positions.

But they have now gone on the offensive…

“We have reason to believe that fraud has been committed against our campaign,” McCaskill campaign manager David Kirby said.

But then, a self-described “startled” McCaskill (who is essentially tied with her opponent)…

…attempted to distract from the truth of the undercover videos, The Daily Caller’s Virginia Kruta reports that McCaskill suggested during an interview that Missouri’s Republican Attorney General Josh Hawley – who also happens to be her challenger in the current race for the seat she has held since 2006 – was somehow involved in the creation of those videos.

McCaskill RESPONDS… hours before the next undercover video from her campaign will be published. Check back soon to see what your staff says in the next one, @clairecmc! pic.twitter.com/Q22NdHdgil

— PVeritas Action (@PVeritas_Action) October 17, 2018

Hawley was quick to react to McCaskill’s accusations…

Let’s review last 24 hrs. 1) @clairecmc & staff caught on tape telling the truth 2) McCaskill accuses ME of fraud 3) McCaskill demands Missouri give her special prosecutor to investigate her truth telling #MOsen

— Josh Hawley (@HawleyMO) October 17, 2018

Adding that…“… accusing people of crimes is a serious thing. If you have evidence of a crime, please come forward with it immediately. Otherwise, please stop politicizing the legal process for your reelection.”

Senator, accusing people of crimes is a serious thing. If you have evidence of a crime, please come forward with it immediately. Otherwise, please stop politicizing the legal process for your reelection. #MOsen

— Josh Hawley (@HawleyMO) October 17, 2018

However, as The Daily Caller notes, McCaskill’s campaign hedged slightly, with Kirby then saying that Hawley was “perpetrating this fraud by promoting it and encouraging it.”

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In the latest conflicting report over WaPo columnist Jamal Khashoggi’s demise, ABC reports that according to a Turkish official, Secretary of State Mike Pompeo heard an alleged audio recording of Khashoggi’s murder inside the Saudi consulate in Istanbul. Contradicting the official White House narrative, the anonymous official said that the recording was played in meetings in Turkey on Wednesday, and that Pompeo was given a transcript of the recordings.

However in refutation of the ABC report, the State Department denied Pompeo had heard the recording, although it did not address whether he had been given a transcript. “The secretary addressed this yesterday. He has not heard a tape,” spokeswoman Heather Nauert told ABC News in an email. During his flight back from Istanbul, Pompeo was asked if he had heard the audio, to which he had a non-committal response: “I don’t have anything to say about that,” he said.

Separately, ABC News has also learned that Turkish officials believe that Khashoggi was killed inside the Saudi consulate following a struggle that lasted eight minutes and that they believe he died of strangulation.

On Thursday morning, Pompeo met with president Trump to brief him on his visits to Turkey and Saudi Arabia, where he met with Saudi King Salman and Crown Prince Mohamed bin Salman. While Trump had previously asked to hear the recording, it was unknown if Pompeo shared the transcript with the president, but soon after the meeting the president “changed his tune”, and while earlier in the week Trump questioned whether the audio recording existed and cautioned against blaming Saudi Arabia for Khashoggi’s disappearance, on Thursday afternoon his administration abruptly canceled a visit to Saudi Arabia by Treasury Secretary Steve Mnuchin to attend a large investment conference hosted by the Crown Prince, whom Turkish officials have reportedly claimed was behind Khashoggi’s killing. Later on Thursday, Trump told reporters that “it certainly looks like” Khashoggi was dead.

“It certainly looks that way to me, it’s very sad,” Trump told reporters before boarding Air Force One to attend a political rally in Montana.

The president also repeated what he said over the weekend, threatening that the consequences for Saudi Arabia, if they are found responsible “will have to be very severe. It’s bad, bad stuff.”

For now, Trump said the United States is waiting for the results of several investigations but will then make a “very strong statement.” After his meeting with Trump, Pompeo told a press conference that the Saudis should have “a few more days” to finish their investigation into Khashoggi’s disappearance. Careful not to push too far, Pompeo also stressed the “long strategic relationship” that the U.S. has with Saudi Arabia, and described the country as an “important counter-terrorism supporter.”

For much of the past week, Turkish officials claimed that Khashoggi was killed in the consulate, and that a group of 15 Saudi men flew to Istanbul around the time of Khashoggi’s disappearance.

A close friend of Khashoggi, Turan Kislakci, told ABC News in an interview on Wednesday that Turkish government and security officials had told him that Khashoggi was dead.

“They said, ‘We have audio on this. We know all the details about what transpired,'” said Kislakci. “They said, ‘We were able to access this the first day, and we have various other evidence on this.'”

Kislakci claimed that the tapes reveal that after Khashoggi went into the Saudi embassy, he was given documents to sign. Khashoggi refused, and was killed.

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Liberal Political Action Group (PAC) American Bridge 21st Century announced Wednesday night that Wilfred Michael Stark, 50, had been fired after he was arrested and accused of battery against Kristin Davison, the 31-year-old campaign manager for Nevada GOP gubernatorial candidate Adam Laxalt. 

Stark was arrested by Las Vegas city marshals Tuesday evening after witnesses say he pushed his way into a campaign event and grabbed Davidson’s arm, twisting it hard enough to leave red marks. Davidson made a citizen’s arrest following the incident. 

“Mike Stark aggressively interrupted our conversation, both by loudly yelling and physically shoving a camera and his body at the attorney general and me,” reads Davison’s signed police complaint. “I asked him to back away and he did not.”

“Politics is a little bit aggressive these days, but this is just insane,” Davison told Fox News earlier Wednesday. “I’ve never seen anything like it.”

Davison told Fox News that Stark “burst into the room where [Laxalt] and I were talking with a camera” and got “very physical” with her.

“This man was physically almost body-checking me,” she said. “I was getting nervous for my safety, so we left, and went into an open room.” However, she said Stark tried to follow her, Laxalt and other staffers into the second room.

“He grabbed my right arm, my leg was lodged between the door and the wall. He twisted my arm, and contorted it behind my back,” she explained. “I was scared. Every time I tried pulling away, he would grab tighter, and pull me closer into him.”

Davison said Stark pulled her head into his chest, bruising her neck, and held her there for several minutes. She said it “felt like an hour.”

“I was scared and screaming ‘stop—you’re hurting me,’” she explained.

Davison said Stark warned Laxalt, saying, “Adam, there’s only one way you can make this stop.”

“That really scared me,” she said. –Fox News

In March, was arrested in Washingtton D.C. after pushing a top aide to Interior Secretary Ryan Zinke outside of a congressional hearing – a charge which American Bridge says Stark “adamantly” denied. 

Stark was also arrested last year in Virginia for creating a disturbance while videotaping a parade for American Bridge affiliate, ShareBlue Media, which was attended by GOP gubernatorial candidate Ed Gillepsie. 

American Bridge was founded in November 2010 by Democratic operative David Brock, while the group’s largest single donor is liberal billionaire George Soros, who funded the operation to the tune of more than $2 million between 2015 and 2016. More recently, Soros donated $300,000 to the group in February and $80,000 last year, according to Fox News. 

“Assaulting the female campaign manager of the opposing campaign is disgusting and it has no place in our system,” said Laxalt campaign spokesperson Parker Briden. “This mob behavior from the left is out of control. Encouraging violence, as many prominent Democrats like former Attorney General Eric Holder have recently done, is having real, dangerous consequences.“

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Authored by Kevin Muir via The Macro Tourist blog,

By necessity, today’s topic will venture into the world of politics, so I warn you now – you might be offended. Actually, I have decided to cut jabs at all politicians, so if you feel like your team has been maligned, just read on, I will probably be even worse to the other side.

I want to speak about the recent “trade wars” that the Trump administration has set in motion. There can be no denying that America has ventured down a road of adversarial trade renegotiations not seen in decades. I am not making any judgments about this policy – it is what it is. But to think it doesn’t have profound implications for your portfolio would be naive.

What I used to think

Previously, I believed America’s trade stance was just Trump doing his “Art of the Deal” negotiations. You know – insult your opponent, be belligerent and take extreme stances right until the very end, at which point you just cut the best deal available.

It seemed to me that Trump was simply renegotiating all the trade deals to gain the maximum advantage. He was elected on a populist platform and he considers himself quite the deal-maker, so I thought it would be a little rocky, but that at the end of the day, deals would be reached and the result would be a slight shift a little more in America’s favour.

Yet I am rethinking that viewpoint and let me tell you why.

Collision course with China

Let’s start with the obvious. Trump can insult Canadian leader Justin Trudeau all he wants, but it won’t stop us Canadians from making a deal. Sure, we won’t like it, but we will bite our lip and negotiate the best agreement possible.

Yet Trump’s tactics don’t play as well in China. In Asia, saving face is much more important, and it is foolish to believe the Chinese government will be anywhere near as accepting to Trump’s insults and antagonistic behaviour. Don’t forget that Chinese leader Xi has proclaimed himself “paramount leader” and can plan in decades instead of worrying about the next election cycle. For China, sitting through a couple of years more of a Trump administration without cutting a deal so that “face is saved” is completely acceptable. Especially when Trump continues to behave so disrespectfully.

Many market strategists are convinced China will be forced to acquiesce due to U.S. stocks’ outperformance versus Chinese stocks since Trump’s ramping up of trade tensions. They believe this to be a signal of America’s stronger hand.

I suggest this confidence is misplaced. Chinese response to these market moves will definitely be Rhett Bulter-ian in nature. To think the Chinese government cares about short-term Chinese stock market valuation is ridiculous.

However the same cannot be said for their opponents. Trump has consistently cheer-lead the stock market higher – taking credit for its outstanding performance.

Bloomberg even has a whole page devoted to his tweets about the stock market:

Rightly or wrongly, he has hitched his wagon to the stock market’s fate.

If anything, Trump has exposed a flank that can be exploited. He needs the American economy (and even more importantly, the stock market) to continue outperforming the rest of the world.

So far, so good, but last week’s stock market sell off has shown how sensitive Trump is to each market tick. We weren’t even down 5% from the all-time highs before Trump was throwing Powell under the bus.

From CNBC:

I call B.S. on the idea that China’s recent stock market underperformance means they are desperatefor a deal. Not a chance. If anything, Trump’s administration needs a deal as a serious trade war could result in severe market disruption which would be much more meaningful to Republicans’ chance of relection. On the other hand, Xi has no such worry.

Trump administration steps up the pressure

This next part might be a little tin-foil-hat for many of you, but hear me out. Most strategists blame the equity market sell off on the bond market’s recent weakness. The common narrative is that we finally hit the tipping-point where interest rates affected the real economy. Maybe.

But maybe there was something more ominous going on. The stock market started sliding on October 4th.

I think it is no coincidence that this was the day that Bloomberg Business week published their big expose about Chinese hacking – “The Big Hack: How China Used a Tiny Chip to Infiltrade U.S. Companies.”

This article is a damning piece which poses serious questions regarding the security of U.S. technology due to their reliance on Chinese manufacturing. It rightfully scares the market.

In the days following the publication, all the companies cited in the article denied the story. When given a chance to rescind their claim, Bloomberg Businessweek doubled down and stood by their story citing 17 sources that confirmed the information.

So the question is; who is lying and why?

I suggest the reason that Bloomberg Businessweek was so confident about the story was that the sources were from the U.S. government. Do I think this Chinese hacking is new? Not a chance. Do I think the U.S. government has been aware of it for years and years? For sure. But they have purposely kept it quiet as it would only serve to undermine confidence in American technology companies and damage relations with the growing (and increasingly important) Chinese economy.

Yet, by publishing this article, the Trump administration was signaling the gloves were off.

China instantly understood this was a serious escalation of tensions.

I don’t know if it was the Chinese government selling U.S. assets or whether it was well-connected individuals who understood the ramifications of this development, but I believe trade tensions were the real reason for the recent stock market decline. Sure, all those other reasons cited in the media helped the decline accelerate, but many of those reasons have existed for quite some time.

What changed on October 4th was that it became clear to those who watch markets closely that the chances of a Chinese-American trade deal had greatly diminished.

Dangerous setup

Which brings us to the current environment. Both sides believe they have the upper hand. You might have an opinion about which side is right, but it doesn’t matter – all we care about are the chances of the situation escalating.

As I previously mentioned, I used to think the recent Trump aggression was merely tactics before his government cut a deal at the last moment. And although I don’t discount that possibility entirely, I now believe that outcome is less likely.

Trump has upped the ante, and the Chinese have re-raised.

In game theory, the worst setup is a situation where all players believe they have the upper hand. It usually results in both sides seeing it through right to the end (however unpleasant the final scene is).

Neither China nor the U.S. is ready to blink. Both sides think the other guy has more to lose. If that is the case, then there will be a lot more pain in the financial markets before the problem is resolved.

Time to lighten up

Over the past few months, I have been somewhat more bullish on equities than many of my hedge-fund-brethren. Yet, for the first time in a while, I am worried. I hear all sorts of calls for a year end rally that they are planning on selling into.

Could this happen? For sure. But I am not nearly as confident anymore.

And especially when it comes to the American market. It has been screaming higher versus the rest of the world for the past couple of years. It’s due for a pause.

And I think this Chinese trade war will get much worse before it gets better. All of this adds up to a market where I am willing to starting leaning to the dark side. I have been waiting to write this piece for the past couple of days because I didn’t want to sell into the hole, but we have gotten the bounce from the lows, and now the risks of the downtrend continuing are rising.

What will make me shift my mind? Obviously either side caving and coming to terms on a trade deal would cause me to abandon my thesis. Yet absent that, I think rallies should be sold.

I have a bunch of other trades that I want to implement based on this theory, but I will save that for another day… except to say, gold priced in CNH is breaking out for a reason…

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A former Minnesota FBI agent who admitted to leaking classified documents to The Intercept has been sentenced to four years in prison, making him the second Intercept whistleblower to be placed behind bars in eight weeks following the August 23 sentencing of former NSA intelligence specialist Reality Winner.

Terry James Albury was sentenced Thursday after pleading guilty in April to the unauthorized disclosure of national defense information as well as unauthorized retention of national defense information. 

Prosecutors say he betrayed public trust when he stole more than 70 documents, including 50 that were classified. They asked for him to be sentenced to more than four years.

Albury’s defense attorneys requested probation, saying he’s a patriot who was morally conflicted by the FBI’s counterterrorism policies. –WaPo

On August 29, 2017 federal authorities raided Albury’s residence in Shakopee, Minnesota, where agents found “approximately 58 sensitive and classified US government documents involving multiple government agencies. These documents were recovered on a thumb drive that was wrapped up in an envelope with a reporter’s telephone number affixed to it.”

The date and content of one of the leaked documents corresponded with a story featured on The Intercept. 

Before the judge handed down four year prison sentence, former FBI agent Terry Albury made a final statement: “I sincerely wanted to make a difference and never meant to put anyone in danger.” He accepted full responsibility. @KSTP pic.twitter.com/oU3It3pHcX

— Ryan Raiche (@ryanraiche) October 18, 2018

Read Albury’s plea agreement below: 

Former intelligence analyst Reality Winner was arrested June 3, 2017 after The Intercept published a report containing classified information she gave them regarding a May 5, 2017 NSA document alleging Russian hacking of US voting software. 

Winner was busted after The Intercept contacted the NSA and sent copies of the documents to the agency to confirm their veracity, which they were able to use to trace the documents back to Winner though an internal audit.  The agency learned that Winner was one of six workers who had accessed the particular documents on its classified system, and that her computer had been in contact with The Intercept via a personal email account. 

In response to Winner’s arrest, security experts and journalists alike have criticized The Intercept’s handling of the classified materials, which included publishing unredacted portions which included the printer tracking dots also used to identify Winner as the leaker. 

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In a wide-ranging interview on CNBC, Leon Cooperman, chairman and CEO of Omega Advisors, explained that he doe snot see the market as ‘cheap’ or ‘expensive’ currently but warns that traditional value-manager-driven strategies face difficulties because ” all these quantitative trading systems are destroying the structure of the market…particularly that group that buy strength and sells weakness.”

Cooperman goes on to reflect on last week’s mini-crash as being overdone, because “credit was relatively flat” but warns that “It’s crazy…selling begets selling because of these quantitative trading systems,” adding that he thinks “all this fixation and fear about interest rates is misplaced.”

However, he does warn that “the strongest economy in 50 years” could be a problem as “it forces the hand of The Fed.”

 

Full Transcript

Who knows. I mean basically I think that the whole structure of the market is broken. You know when I came into the let’s put it this way. Whatever success I’ve achieved I think I’ve achieved it because I’ve been very lucky. I have a common sense basically. And I have a strong work ethic. And this whole thing now with all these quantitative trading systems are destroying the structure of the market you know particularly that group that buy strength and sells weakness.

So, everyone I know that’s accumulated wealth, whether it’s Warren Buffett, Ken Langone, Mario Gabelli – all friends of mine – I think they made their fortunes that by buying weakness and selling strength. What’s happening now [with the algos] is they’re trend followers and they really are exaggerating the trends up and down. The condition is that normally call for a significant market decline are just simply not present.

It’s crazy…selling begets selling because of these quantitative trading systems.

But basically as I said a moment ago the conditions that normally lead to a big decline aren’t present… you know the high yield market sold of 2 percent when the S&P was down 8 percent, the overall credit market was relatively flat. So you know I think I sent you a couple of slides to make my points. And we’ll get to him. Basically the things I look at which suggest that the market is OK is not cheap but it’s not expensive you know it’s not an exciting message when I tell you the markets in a zone of fair valuation. Basically it doesn’t excite you but that’s kind of where we’re at.

[Is it more expensive relative to where interest rates are likely to go. Is it that the big issue here is that the biggest fear that people that you bring are going to put them up right now.]

I think all this fixation on interest rates I think is misplaced [and shows the following chart]

This is the end of a 10 year government bond adjusted for (minus) the CPI and the shaded areas on the chart or past recessions and bear markets.

And the message is abundantly clear. Real interest rates for five, six, seven, eight, nine hundred basis points prior to the bear market and recessions of the past. Real interest rates today are zero. The Fed has been extraordinarily accommodative. So you know the market can easily handle the rise in interest rates as long as the slope of the rise is gradual.

I’ll give you some statistics – I don’t make it sound like a statistician – but basically the last 50 years, the S&P multiple averaged 15 times; when it averaged 15 times, the 10 year government with 6.65% and a 90 day bill was 4.95%. Today the multiple on the market is about 16.5 times earnings – so 10% above the historical norm – but the 10 year government is about 3.1% vs 6.65%, and treasuries bills are a little over 2% versus 4.95%. The market will allow for a rise in rates; in fact I think the rise in may be more positive than negative.

[But you know people are just fixated on something that doesn’t make any sense because they worry that the Fed is going to go too far and maybe some of the economic data that’s come out whether it’s related to housing or autos or some from some of these in the market allows for a rise in rates.]

The pricing structure in the market allows for a rise in rates. The condition that normally lead to a big decline… What are they? Recession. OK. There’s no signs of recession the economy if anything is too strong the economy is on fire. I was at a board meeting two weeks ago and the head of the Association made a comment that in 50 years of being in business he has never seen the economy as strong as it is today.

That probably in my opinion is probably a problem because it’s going to force the hand of the Fed.

The economy is very strong, so the recession is not on the horizon. A hostile Fed is not on the horizon ( look at the chart above that said real interest rates are zero), so that’s not a restraining influence on the economy. So the condition that normally lead to a big decline are simply not present.

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Submitted by Nomura macro strategist Bilal Hafeez

Towards the end of September, I sent out a snapshot of expectations for US Mid-Term elections results. With the elections less than three weeks away, I update the numbers. The main takeaway is that expectations for the Republicans to retain control of the Senate has markedly increased. The median expectation across polling, prediction and betting markets was 71% in my last update – today it is 86%. Despite this swing, Republicans have become less likely to win the House as expectations for Democrats to win the House have (modestly) increased from 72% to 74%.

Senate race helped by Kavanaugh

Nate Silver from FiveThirtyEight wrote on this divergence and concludes that there was a Justice Brett Kavanaugh “confirmation bump” in support for Republicans in Senate races but not House races, as Senate battle-grounds are more uniform and demographically-friendly to the Republicans (rural and less educated) than House battle-grounds. Nevertheless, such a swing in recent weeks reminds us that we need to be careful in assuming our base case of a switch in control in the House to Democrats.

US will lose relative fiscal support next year, unless…

If we were to see the Republicans retain the House and increase its majority in the Senate, then that could allow the Republicans to push a major legislation through the market. This could include making tax cuts permanent (currently they are out to 2025, see Lew’s note). But the more tricky area would be spending – would the fiscal hawks in the party attempt to rein in welfare and medical spending, or would President Trump try to push through an infrastructure spending bill. The base case of the Democrats winning the House make any fiscal stimulus even less likely, especially if less centrist Democrats win. This is important for markets as the US has enjoyed a uniquely positive fiscal pulse this year compared to other countries. While it will be positive next year, it will much smaller and crucially similar to other countries ones too. Therefore an absence of additional stimulus would remove a key support for US markets.

And finally

As in my last email, I include the latest odds on the next US President. Trump remains at the top, followed by Democrat front-runners Kamala Harris and Elizabeth Warren. But the biggest changes compared to the last update, is the entry of Michael Bloomberg in at #10.

There has been much chatter on this as he re-registered as a Democrat recently. Then the other changes of note are the entry of soon-to-retired US ambassador to the UN, Nikki Haley, a Republican and strangely Eminem has entered the charts too (“The Rock” has fallen out of the table though!).

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Via The Onion,

Blockchain technology forms the foundation for cryptocurrencies such as Bitcoin, Dogecoin, and Ethereum, but it can be difficult to understand how it actually works.

The Onion answers common questions about blockchain technology.

Q: How does blockchain work?

A: Do you want to talk science shit or do you want to make some fucking money?

Q: Who uses blockchain?

A: Ordinary folks in charge of million-dollar cryptocurrency accounts and diamond supply chains.

Q: How much is a blockchain?

A: It’s only $250 per block of chain. A steal, if you ask us.

Q: What is the benefit of using blockchain?

A: Provides a more efficient way for you to lose all your money at once.

Q: Is the system fully secure from hackers?

A: Nothing that bad has happened yet, so we’re just going to say yes.

Q: How do banks feel about blockchain technology?

A: As long as banks still find a way to exploit the poor, they couldn’t care less.

Q: Is there really child pornography encoded into Bitcoin’s blockchain?

A: Only a little bit!

Q: Would widespread use further entrench us in our dependence on technology without which we would be plunged into a horrifying new dark age?

A: Yes.

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