Category: zerohedge

Authored by Brandon Smith via Alt-Market.com,

In an article published in September 2015 titled ‘The Real Reason Why The Fed Will Raise Interest Rates’ I outlined a kind of economic war game, a predictive theory in which the Federal Reserve would hike rates into clear economic weakness in order to deliberately cause the implosion of the vast financial bubble they had created through several years of quantitative easing. At that time this theory received a lot of opposition. Nearly everyone in the mainstream and in the alternative media argued that the Fed was going to shift to NIRP (negative interest rates), in order to continue propping up the system. The idea that the Fed would actually raise rates and cause an engineered crash after propping up the system for so long was treated as outlandish.

Of course, this is exactly what happened. Within a year the Fed had started to tighten policy instead of extending stimulus measures. The denial that this was happening was so strong that many analysts claimed the Fed was simply “pretending” to tighten when they were actually still stimulating. Yet, this claim turned out to be incorrect; nearly every sector of the economy began an immediate and steep decline the moment the Fed launched interest rate hikes and cut its balance sheet. The evidence was mounting that yes, the central bank was not just pretending to tighten – it was actually strangling liquidity and the mirage of economic recovery was quickly fading.

To this day and despite all the evidence to the contrary some people still argue that the fed is either not tightening, or will reverse on tightening measures very soon. In fact, every month since last November there has been a chorus of voices saying that “this is the month” that the Fed will return to easing and possibly QE4. And, every month they have been wrong. This includes this past month of June, when so many people were so certain that a Fed interest rate cut was baked into the cake.

In my article ‘The Federal Reserve’s Controlled Demolition Of The Economy Is Almost Complete’, published in March, I predicted that the Fed would continue to hold interest rates steady for many months to come and that Fed language of “accommodation” and “patience” was a head-fake to keep the investment world tied up in stock markets as every other major indicator showed a recession was upon us. Again, this is exactly what has happened.

Once the Fed raised rates to their neutral rate of inflation (something they had not done for decades) the fate of the US economy was sealed. To be fair, the real rate of inflation is much higher than the Fed admits, but the point remains that the US economy as it stands today cannot handle even moderately higher rates. With corporate and consumer debt at historic highs not seen since 2007 just before the credit crash, any interest pressure above zero is going to destroy the fragile economic bubble.

Some people claim that the Fed is completely unaware of this situation and is fumbling in the dark. But this is not true. In 2012 Jerome Powell outlined exactly what would happen if the Fed began tightening policy in the October minutes of the Fed meeting. Powell KNEW that higher rates and balance sheet cuts would cause the kind of crash which is now happening; but as soon as he became the Fed chair in 2018 he launched tightening measures anyway.

Whether you are for or against Fed tightening measures is truly meaningless.  The point remains that the Fed created the Everything Bubble, and now they are crashing the Everything Bubble and they know they are doing it.  So, where do we go from here? Has the Fed done all the damage it needs to do to ensure a crash? Is all this talk of accommodation actually real this time? Will they cut interest rates soon in order to prop up the system longer.  I continue to predict the Fed will not be cutting interest rates or ending balance sheet cuts until there is a blatant breakdown, or a major distraction event. And by “breakdown” I am referring to public perception of the economy waking up to the reality of the crash.

It is important to remember that the US economy has been in negative territory for the past 10 years. It has been hanging by two thin threads – the first being Fed stimulus (which has now been taken away – sorry skeptics but this is a fact), and the second being public perception of recovery. The central bankers are now relying heavily on the manipulation of public perception in order to keep certain sectors (like stock markets) afloat for a little while longer. What is the specific goal in this? It’s hard to say. However, the move to trick the investment community into making far reaching assumptions has some advantages.

Stock markets are absolutely useless as an economic indicator because they lag far behind real financial conditions.  Stocks fall after every other fundamental indicator has already turned negative and the crash is already at the public’s doorstep.  However, they do serve one purpose; stock prices can be exploited to give the population a false sense of economic health, leaving them unprepared and vulnerable to the consequences of a downturn.  Most Americans do not track economic data beyond stocks and employment, which are both highly manipulated points of reference.

Stocks remain levitated on two factors:  Massive stimulus from China since December, and blind hope from the investment world that the Fed is going to bring back the punch bowl and pump out stimulus again. Minor language changes to Fed statements are now hyped as dominant indicators that the Fed is about to flood the markets with liquidity; yet other language indicators showing the opposite are ignored. With so much capital lured into stocks on the “certainty” of Fed rate cuts or stimulus – I ask, what would happen if the Fed DOES NOT fulfill growing market expectations?

On June 19th just after the Fed meeting I noted that there was little chance of of a rate cut in July, and recent statements from Powell and St. Louis Fed President James Bullard support this argument.

Just after the June meeting, many in the investment world priced in a 100% chance of an interest rate cut in July. Why did they do this after being wrong every month for the past several months? I still can’t figure out what the source of this assumption is. Nowhere in the Fed’s minutes or in post meeting statements has the Fed indicated a cut in July. The reality is that the last Fed meeting showed NO CUTS until the end of 2020. This does not necessarily mean the Fed will hold rates until that time, but there is no evidence to support the notion that they will cut in July.

Perhaps I am wrong and the Fed will follow assumptions this time instead of assumptions following the Fed. I haven’t been wrong on Fed policy changes yet, but my point is, there is no evidence that they will cut next month, only expectation based on hearsay.

The Fed continues to lie about economic expansion, claiming a strong recovery or improving fundamentals when all the data shows economic decline; from bond yields to housing sales to housing prices to auto markets to manufacturing to shipping and freight to retail closures to weakening job prints, etc. At the same time we are witnessing inflationary pressures in necessities like food, fuel and rental housing. It’s a stagflationary mess.

Incessant reporting of strong economic health and the defiant dismissal of declines is not the behavior of a Fed that is about to capitulate on tightening. Yet, the investment community has been all-in on a rate cut for months. When the rate cuts don’t come, they then assume that the past month was close, and that the next month is a sure thing. It’s truly bizarre.

As long as the Fed holds rates near the neutral rate of inflation and continues to cut assets from its balance sheet, flooding the economy with treasuries, mortgage backed securities and toxic assets, the decline of multiple sectors is assured. There may come a point in which the Fed has done all the damage it needs to do to accelerate the crash, allowing them to then pull back on tightening, but we have not reached that point yet. As I have noted in past articles, the Fed has done all this before.

Creating enormous financial bubbles and then deliberately popping them is a classic central bank maneuver. Each time, they claim they were “unaware” of what was happening, then years later admit outright that they knew what was happening; from Alan Greenspan admitting that the Fed was well aware of the bubble that led to the crash of 2008, to Ben Bernanke openly admitting that the Fed had caused the Great Depression by tightening into economic weakness in the 1930’s.

Tightening liquidity and policy conditions into economic weakness is what central banks do to trigger chaos. But why would the Fed deliberately initiate a controlled demolition of the US economy? The bottom line is central banks are tools of the globalist elite. They are not as autonomous as they seem. No, the Fed does not answer to the US president, but it does answer to the Bank for International Settlements, as do all other major central banks in the world.

The economic disasters they create are then used as leverage to consolidate financial wealth as well as control of hard assets into the hands of these elitists. Crisis events are also used to consolidate power over the people and to centralize governance on a global scale. The Fed is nothing more than a mechanism used to help achieve this agenda.

Alternative economists should abandon any notion that Donald Trump will interfere with this plan. Trump has been under the thumb of the globalists ever since Rothschild banking agent Wilber Ross bailed him out of his debt obligations in the Taj Mahal casino in the 1990’s. Wilber Ross is now Trump’s Commerce Secretary, standing over his shoulder along with a large crew of other elites in Trump’s cabinet. This would explain why Trump vehemently criticized the Fed for inflating the Everything Bubble under the Obama administration through artificially low interest rates during his campaign, and then suddenly pulled a full reversal once he was in the White House and claimed his administration was the reason for all time highs in stock markets.

Trump has also stated time and time again he has no intention of trying to unseat Jerome Powell (he did it again just this week), and frankly he has no power to do so anyway.  His “battle” with Powell is a farce.

The Fed is a private entity, and as Alan Greenspan once openly admitted, it answers to no one. Trump has attached his administration so completely to the economic bubble that when it completely collapses he and his conservative followers will inevitable be blamed and it is my belief that he is doing exactly as he has been told to do by the banking cabal.

This leaves one final question – What is the Fed waiting for? Why not crash everything including stocks right now? Why continue to head fake investors on rate cuts and accommodation? As I noted in my recent article ‘Globalists Only Need One More Major Event To Finish Sabotaging The Economy’, the elites need a distraction that would satisfy the public’s search for a rationale after the consequences of the crash finally hit them. The accelerating trade war is very useful for this, but it is not enough. The globalists need something else.

This may come in the form of a shooting war, possibly with Iran. It may come in the form of a “No Deal Brexit” in October (and I continue to predict this is an intended event). It may also come in the form of a surprise retaliation from US trading partners, such as a dump of US treasuries or the dollar as the world reserve currency. This is what the globalists are waiting for.

Once such an event takes place, or perhaps just before the event, the Fed may finally cut rates again, or stop its balance sheet dumps. It may not. Trump’s trade war is leading towards price inflation, which could be used by the Fed as an excuse to keep interest rates steady or even hike them again. Nothing is written in stone except the primary agenda, which is: Inflate financial bubble through stimulus, implode financial bubble through tightening. Afterwards, the Fed has options. It can stimulate again as a non-solution, or do nothing. Either way, the crash is already a given and the Fed has no intention of stopping it.

*  *  *

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via ZeroHedge News https://ift.tt/2RFC2L5 Tyler Durden

According to a new survey by Chicago-based advisory firm Sikich LLP, approximately two-thirds of manufacturers are preparing for a recession, with 27% of firms expecting a shock to the economy in the next 12 months.

The Federal Reserve has communicated a rate cut cycle could be imminent, and rate traders are pricing in three, 25bps cuts by January 2020. The Fed is more than nine months too late in cutting – so any cut today would be less pre-emptive than most of Wall Street believes. That is why 63% of the companies surveyed are taking immediate action to weather an imminent downturn in the economy.

The survey was conducted in April, had online responses from 310 companies spanning many industries, including wholesale and distribution; industrial equipment; metal fabrication; apparel, footwear and textiles; chemicals and petroleum; aerospace and defense; and food and beverage.

About 27% of respondents said a recession is very likely in the next 12 months, and the study noted that “there was a significant gap in the outlook between small and large firms.”

Just 21% of firms with less than $500 million in annual revenue expected a recession, but much larger firms had about 49% of them expecting an imminent downturn.

Jerry Murphy, partner-in-charge of Sikich’s manufacturing and distribution practice, said larger multinationals typically prepare more in advance than smaller firms.  

“They don’t often share that kind of visibility with their smaller suppliers, so the small and medium-sized businesses may not be learning of this slowdown or this pipeline as quickly,” Murphy told BizTimes Media. “It’s not uncommon for them to learn about it rather quickly or abruptly.”

Murphy said preparations for a recession are likely the result of a maturing expansion, one that is in later innings, which could become the longest on record next month. Executives feel that the economy could be vulnerable to shocks as growth rates in the US slump.

“The pain of 2008 and the Great Recession is still pretty vivid in most business owners and management teams and they learned a great deal from that experience,” Murphy said. “Preparation for an eventual slowdown, they know how to do (that) effectively and they’re taking steps so they don’t get caught off guard.”

Recently, JPMorgan Global Manufacturing PMI fell into contraction with a sub-50 print, the weakest reading in data since mid-2016.

The Milwaukee-area PMI, part of the Marquette-ISM Report on Manufacturing, printed 47.83, which is the first time the southeastern Wisconsin manufacturing sector contracted since October 2016. The PMI has trended down since 1H18 as manufacturers deal with supply chain uncertainty, surging prices, and tariffs when exporting their products.

“Despite a long run of impressive economic growth, manufacturers face challenges related to rapid changes in the industry, geopolitical uncertainty and the prospect of an eventual economic downturn,” Murphy said.

Executives in the survey were undecided on the impact of tariffs and retaliatory tariffs between the US, China, Canada, Mexico, and Europe. About 38% of them said tariffs would have a positive impact on their business, while 35% expected a negative effect.

Murphy said companies importing from China have seen a significant deterioration in their profit margin and will make substantial changes to their supply chains in the coming quarters.

“They did a lot of buying prior to some of the more drastic tariffs,” Murphy said. “I know clients were doing everything they could to get as much product into the United States or at least on the water to avoid the tariffs or the higher tariffs.”

At some point, with enough companies preparing for a recession, it could become a self-fulfilling prophecy by the next presidential election – but, in the meantime, economic shocks could develop in the back half of the year, due to trade disputes and faltering global growth.

via ZeroHedge News https://ift.tt/2X6YZYk Tyler Durden

Authored by Mac Slavo via SHTFplan.com,

The city of Los Angeles is quickly descending into a cesspool of decay and disease.  With bubonic plague now likely present amongst residents, the city and the state of California are on the verge of becoming a third-world hellscape.  Some say that that’s already happened…

Tucker Carlson had historian Victor Davis Hanson on his show just last week, where the latter said that California is on the verge of becoming the nation’s first Third World state. From trash being illegally dumped to city hall becoming a rat-infested den in the city of LA, it all points to the decay suffered when Democrats run things. Even police stations in the city are loaded with rats and according to Townhall, one was fined $5,000 over its conditions that left one officer stricken with typhoid fever. California’s descent has gotten to the point where there is a possibility that bubonic plague (the black death) may now be present in the city.

This isn’t new information either. Typhus outbreaks were being reported back in February. Typhus is not transmitted person-to-person, and flea-borne typhus can spread to people from infected fleas and their feces. Typhus infection can be prevented through flea control measures on pets, using insect repellent to avoid flea bites and clearing areas that can attract wild or stray animals like cats, rats, and opossums, according to the Department of Public Health.

Typhus is spread by fleas hitching a ride on rats. While the general population struggles under the weight of the government (local, state, and federal in LA’s case) and the homeless population continues to climb up, the same cannot be said for the rats that carry fleas the cause typhus. The rat population in LA is doing just fine, however, as piles of garbage dot the cityscape, making it Thanksgiving Day every day for the city’s fat, happy rodents, wrote the American Thinker. -SHTFPlan

California’s burgeoning homeless camps are not the most hygienic places to live, obviously.  And with the homeless population growing daily, the encampments are becoming more dangerous when it comes to crime and disease. Dr. Drew Pinsky said this month that there has been a total and complete breakdown of services in the city that has placed the population at risk of infection and other health-related issues.

“We have a complete breakdown of the basic needs of civilization in Los Angeles right now,” Pinsky told Fox News host Laura Ingraham.

“We have the three prongs of airborne disease, tuberculosis is exploding, rodent-borne. We are one of the only cities in the country that doesn’t have a rodent control program, and sanitation has broken down.”

Pinsky said bubonic plague, which is also known as the “Black Death,” a pandemic that killed off millions in the 14th century, is “likely” already present in Los Angeles. The plague is spread by infected fleas and exposure to bodily fluids from a dead plague-infected animal, with the bacteria entering through the skin and traveling to lymph nodes.

“This is unbelievable. I can’t believe I live in a city where this is not Third World. This is medieval,” Pinsky said, according to Fox News. 

“Third World countries are insulted if they are accused of being like this. No city on Earth tolerates this. The entire population is at risk.”

via ZeroHedge News https://ift.tt/2ZU2Vhc Tyler Durden

Despite SpaceX’s latest launch ending in a fiery crash, as we noted earlier this week, that hasn’t stopped employees from apparently “rejoicing” about the Falcon Heavy’s launch delivering 24 satellites into orbit, according to Bloomberg. 

Apart from the center booster failing to land on a ship in the Atlantic Ocean, the mission is being deemed a success, and was once dubbed “SpaceX’s toughest test”. 

Deployment of DSX confirmed! pic.twitter.com/O0nFH1NdFl

— SpaceX (@SpaceX) June 25, 2019

As it has been making progress, SpaceX has become one of the world’s most valuable closely-held private companies. It’s now worth $34 billion, and SpaceX equity is starting to become far more in demand than Tesla’s equity, which has fallen 33% this year.

As such, Musk’s personal net worth picture is shifting accordingly, with SpaceX now his most valuable asset. It makes up more than two thirds of Musk’s net worth now – a reversal from previous years where Tesla was responsible for most of his fortune.  

Recall, in early June, we wrote an article about how Musk’s net worth had fallen $4.9 billion since the beginning of the year. Musk’s net worth now stands at $19.7 billion and this has bumped Musk from #29 on the Bloomberg Billionaire’s Index down to #46. 

Ellison bought 3 million shares last year and joined the company’s board in December.

via ZeroHedge News https://ift.tt/2J9kVgK Tyler Durden

Authored by Antonius Aquinas via AntoniusAquinas.com,

As modern man continues to wantonly deviate, flaunt, and reject the natural law and the Divinely-created order from which it derives, it is not surprising that illusions like Bitcoin and other crypto currencies have captured the imagination of many and have provided a vehicle for scammers to rip off their fellow man.

Crypto currencies are a more complex, yet still devious derivative of the immoral, economic destructive, and social debilitating system of central banking.  In response, Bitcoin pumpers have craftily tried to portray digital currencies as a “decentralized” alternative to the present fiat, paper-money standard.

While this has attracted many libertines and “fast buck” speculators, Bitcoin is  more similar to the present fractional-reserve monetary order than a real honest-to-goodness money and banking system based on 100% redeemable currency.  Moreover, crypto currencies’ initial allure was that they could be used as a general medium of exchange, but as time has gone on, their sycophants have had to concede that none of these Ponzi schemes can act as money. 

Unlike a metallic monetary order where gold and silver have to be mined and brought into use through land, labor and capital, Bitcoin, like paper money, is created out of thin air.  In this sense, however, paper money is superior to Bitcoin because it can be used for other purposes albeit severely limited – wall paper.    Bitcoin, instead, has NO intrinsic, or “use” value, as precious metals did prior to their use as general medium of exchanges.

Crypto currencies also fit nicely in the on-going efforts by the Establishment and monetary authorities to eliminate cash in transactions.  Despite the talk of “decentralization” and privacy that crypto currencies’ supposedly provide, all transactions on the computer and across the Internet can be recorded and traced which governments will use to spy on their tax slaves.  In direct contrast, gold and silver carried on one’s person or stored for safe keeping is the most private and secure means of wealth preservation ever known. 

The banksters have been pushing a cashless world to reduce their operating costs as Bank of America’s CEO Brian Moynihan recently called for:

We want a cashless society. We have more to gain than anybody from a pure operating cost (perspective).*

If anyone believes that the only reason banksters like Moynihan want a cashless society is to reduce costs, they are incredibly näive.  Banks and other credit institutions have, from orders of the surveillance arms of the national security states across the globe, de-platformed and tried to silence all sorts of alternative and politically incorrect websites and groups by shutting down their bank and credit card accounts.  If cash is outlawed, it will have a devastating effect on dissonant outlets and true free speech in general.

The efforts to get rid of cash has been a long held goal by the ruling class that began with the introduction of paper notes which were granted legal tender status.  Irredeemable notes for specie followed and outright confiscation and prohibition of gold ownership took place in America and other jurisdictions in the 20th century.  Internationally, gold was finally severed from monetary use with President Nixon’s insane decision to no longer redeem US dollars for gold in 1971.    

More importantly, and what infuriates Left-Libertarians of the crypto movement is that the precious metals were created by Divine Providence to be used by His creatures to augment their lives and eventually create sophisticated societies.

The qualities and quantity of gold and silver were designed in their optimal amounts to serve as a medium of exchange.  There are ample historical episodes of the social and economic disasters which have occurred when “natural money” was replaced by a man-made substitute.  The powers-that-be are certainly aware of this historical “law” and have long understood that to maintain their hegemony gold and silver must not be a part of a monetary order.

The contemporary world is in a state of perpetual crisis because it has persistently violated the natural law.  The creation of more illusions such as Bitcoin and other crypto currencies is not a solution, but are diversions which prevent mankind from returning to a natural monetary order.

via ZeroHedge News https://ift.tt/2xn3bZz Tyler Durden

Put your hand up if you know what an autocallable is. Put your other hand up if you also know that ground zero of the next volatility catastrophe could be South Korean autocallables.

Not a lot of hands in the air, so let’s back up.

As the “world’s most bearish hedge fund manager”, Horseman Global’s Russell Clark explained back in January, autocallables, which are fundmentally structured products that are extremely popular with South Korean traders, are best thought of as a service. A bank will offer to sell insurance on the stock market on your behalf, so that you can generate an income from the premiums received. So rather than buying an autocallable, it’s better to think of an investor as posting collateral for a bank to sell puts on their behalf. Typically, the bank will tell the investor what sort of yield they can generate, for a certain level of insurance. For example, a 5% return as long as the S&P 500 does not fall to 2000, from roughly 2900 today.

Typically, when markets fall, the price of insurance rises, and the bank does not need to sell that much insurance to meet a 5% yield target for an investor. Conversely, when markets rise, insurance prices fall, and banks would need to sell more insurance to meet the target yield. Hence, in normal markets, the risk to clients is balanced. More insurance is sold when market rise as insurance prices are low, and less insurance is sold when market fall as insurance prices rise.

However, there are increasing signs that this market dynamic is breaking down.

According to Horseman research, Europe’s Stoxx 50 is the most popular underlying index in the entire autocallable industry globally. Why is the Euro Stoxx 50 so popular among autocallable products? Clark believes that there are two reasons.

1. Until very recently, the Euro Stoxx 50 has tended to have a higher implied volatility, which has meant that yields on Euro Stoxx autocallables have tended to be higher.
2. The second reason is that the biggest structurers of autocallables tend to be French banks, so it would be easier for them to use their local index. Euro Stoxx 50 was weak in 2018, falling 18%. Volatility rose a little bit during the same period, but is still at a much more subdued than level seen in 2016 and 2015 for equivalent market movements.

However, as Horseman cautions, the relatively subdued level of Euro Stoxx 50 increasingly looks out of sync with underlying features of the European financial markets. Euro Stoxx volatility rarely trades below S&P volatility, but currently this is the case. It is possible to argue that lower recent historic volatility in the Euro Stoxx 50, relative to the SPX 500 has caused this, but given that Europe has many structural issues, and far fewer stocks in its index, this tends to be an aberration.

This is even more striking when one observes that a classic risk indicator such as the spread between French and German Collateralised Debt Securities (“CDS”) is beginning to diverge.

While the divergence in French and German CDS is bearish in itself, it is having a feeback, or “knock-on” effect for French banks, which are key autocallable structurers. Two of these banks are also members of the Euro Stoxx 50, which creates the potential for a vicious cycle – just recall the trading blows ups at Natixis and SocGen earlier this year, much of this came from the structured market. 

As such, a French CDS widening could cause problems for French banks, which could cause problems in autocallables, which then could cause more problems for French banks and so on.

Besides European banks, autocallables are especially sensitive to changes in Korean (South, of course) risk assets. Or rather, the other way around.

The amazing resilience of the Kospi to virtually any stress in the past decade having traded in a tight range around 2000, is – according to Clark – explained by the fact that Korean volatility is been kept subdued by a large increase in the amount of autocallables outstanding. This can be seen from the NICE P&I annual review of Korean Autocallables; the review gives the number of new issues, as well as existing issues that have been redeemed. Redemption occurs when the underlying index rises above an upper barrier. As markets were weak over the last year, fewer redemptions have occurred, implying a substantial increase in outstanding autocallables. This would imply not only increased downward pressure on the price of volatility, but also a substantial increase in hedging needed for these products or volatility selling.

For those who see analogues between autocallables and inverse VIX ETFs, or VIX futures, that’s not by accident –  as a result of the reflexive nature of the market, trading the derivative of market vol, when in sufficient size and scale, can reverse the arrow of causality and lead to vol derivatives determining which way the underlying (in this case market) moves.

Going back to autocallables, historically their supply and demand has been kept in check by rising markets. If the market rises over an upper barrier, old autocallables are redeemed, reducing supply from the market, alternatively they can be cancelled by being “knocked in” (a situation where the underlying investor no longer receives a yield, but the underlying index is at current value). The lower barrier is usually between 25% and 40% below market levels and if “knocked in” the buyer of the autocallable will lose capital equal to the fall in the index.

So what does all of this mean?

Well, as Clark wrote back in February, “in my opinion, the market has become overburdened with autocallables. In the short term they tend to reduce volatility of the underlying market. But if the underlying index, in this case the KOSPI falls – for example because due to a plunge in semiconductor stocks – it will likely result in autocallables getting ‘knocked in” and the pressure on Korean volatility disappear, “the resulting rise in Korean volatility will likely lead to significant rise in the price of volatility.”

That was 6 months ago… where are we now?

Well, after a brief period of market turmoil, the Kospi resumed its upward grind, and as stocks rose and vol dropped, autocall issuance exploded. According to Bank of America, Korean autocallable notes continue to get issued at a record-high pace of > $8 BN per month (nearly double the monthly average last year was US$4.9 Bn).

As for the underlying assets, at US$ 2.8 BN notional, the most popular basket remained HSCEI + SPX + SX5E.

As BofA further adds, Korean autocalls are likely to knock out as stocks continued their upward grind.

So what does all this mean? Well, in a somewhat deja vu repeat of what happened in February 2018, an instrument that not only benefits from lower vol, but its purchases actually lead to lower volatility, is now being purchased (and issued) at never before seen levels, in the process resulting in subdued equity vol across such global markets as the HSCEI, the S&P and Stoxx 50.

And yet this is precisely the trade that Clark believes will end in tears as everyone is one again on the same side of the vol trade, which as readers may recall ended spectacularly on Feb 5, 2018 when too many investors had purchased the XIV only to see it meltdown following a somewhat modest increase in volatility.

Which begs the question: could autocallables be ground zero – in S.Korea of all places – for the next volatility catastrophe? To Clark the answer is yes. As he told Bloomberg last month, investors hungry for yields have piled into autocallables, artificially suppressing stock market instability. This is “unsustainable and will end badly. I’ve seen it twice, three times even. And it feels so close to that inflection point. Everyone’s in the same trade.”

He is, of course, correct, but just as the XIV doomsayers were ignored up to Feb 2018, so too those who forecast the collapse of the autocall market will be ignored until it is too late. The question is what happens once the autocall house of dominoes starts to collapse – will it result in a contained implosion, much the same way the inverse VIX ETF disaster failed to shock the market for too long – or will the negative feedback loop only escalate as one after another autocallable is knocked in, resulting in a volatility shockwave that spreads instantly around the globe?

The answer will likely be revealed during the next VIX spike, and if Clarke is correct, the outcome will be the worst possible one.

via ZeroHedge News https://ift.tt/31WW8oQ Tyler Durden

Authored by Michael Snyder via The Economic Collapse blog,

Right now the entire nation is buzzing about the very first debates for Democratic presidential contenders in 2019, and much of the focus of those debates should be on the economy.  A total of 20 candidates will participate in those debates, and the vast majority of them don’t have a prayer of actually winning the nomination.  Of course all of them will have “plans” for “fixing” the economy, but the truth is that most of those plans really aren’t that radically different from what has been tried in the past.

No matter who has been in the White House, our insatiable appetite for debt has allowed us to enjoy a tremendously bloated standard of living that was far beyond what we actually deserved.  We have been consuming far more wealth than we have been producing for so long that most Americans have come to accept this state of affairs as “normal”.  And under no circumstance will Americans elect any presidential candidate that would suggest that we should be willing to accept a lower standard of living and quit going into so much debt. 

Everyone wants to hear that we will be able to have an even higher standard of living in the future, and of course that is what a lot of our politicians eagerly tell them.

But it isn’t true.

Sadly, the reality of the matter is that we are at the very end of the greatest debt bubble in the history of the world, and the way we live is about to dramatically change no matter who we send to Washington.

As I discussed yesterday, the evidence that the U.S. economy has already entered a significant downturn continues to grow.  All of the economic numbers that we have been getting lately have been bad, and yet so many of the “experts” continue to claim that the U.S. economy is in great shape.

In fact, a survey that was just released had some rather starting results.  100 percent of the “experts” that were surveyed rated the performance of the U.S. economy as either “excellent” or “good”, but average hard working Americans were a lot more evenly split…

A new survey from financial information website Bankrate.com found that everyday Americans have a less favorable view of the economy than experts do. All the experts rated the economy as being “excellent” or “good,” compared to just 59 percent of others. And 39 percent of everyday Americans said the economy was “not so good” or “poor.”

Bankrate surveyed around 1,000 people and nine economic experts for the study.

The survey also included a question about when the next recession would begin.  Approximately 40 percent of average hard working Americans felt that a recession had either already begun or would begin very soon, but none of the “experts” felt that way…

Everyday Americans also said they expect a recession to hit sooner than the experts predict. A fifth of Americans polled said they believe the recession has already begun, and 21 percent said they expected it to begin within six months or a year. However, all the experts said they don’t expect a recession to begin for either one to two years or more than two years.

Perhaps we should stop calling them “experts”, because they appear to be completely and utterly clueless.

And we had better hope that the economy can hold up, because a different survey has found that 71 percent of all Americans say that they “are unprepared for another financial crisis”…

Meanwhile, 43% of Americans say they feel financially insecure and 71% are unprepared for another financial crisis, such as going bankrupt or losing their home, a survey of 24,070 adults released this week by market researcher YouGov found. Some 55% of those who feel unprepared say they’re not confident that they will be able to afford retirement; they’re more likely than those who feel financially secure to say the government should make sure everyone has health insurance.

Today, 59 percent of all Americans are living paycheck to paycheck, and U.S. consumer debt just soared to another brand new record high.  People are partying when they should be preparing, and this new economic downturn is going to catch most of us completely off guard.

And day after day we continue to get more numbers that are telling us that the economic outlook is very bleak.  For example, it is now being projected that U.S. auto sales will drop substantially over the next two years…

The U.S. auto market hit a record for new cars, with 17.5 million in sales, in 2015. Sales the following year were flat then dipped to 17.2 million in 2017 and rebounded in 2018, rising to 17.3 million. But the first half of this year has plunged into negative territory. Edmunds anticipates sales for all of 2019 will drop to 16.9 million. That’s the same estimate from AlixPartners, which is forecasting a further dip to 16.3 million in 2020 and just 15.1 million in 2021.

Now we are in election season, and all sorts of different candidates will be touted as the one “that can turn the economy around” and restore “the promise of America’s future”.

Every election cycle they spout the same nonsense, and it is amazing that anyone still falls for it anymore.

Right now, America is on a highly self-destructive path that only leads to economic oblivion.  We are 22 trillion dollars in debt, we have been adding more than a trillion dollars a year to the national debt for more than a decade, state and local governments are drowning in record levels of debt, corporate debt has more than doubled since the last financial crisis, U.S. consumers are almost 14 trillion dollars in debt, and the world as a whole is now 244 trillion dollars in debt.

If we keep doing the same things over and over again, we are going to keep getting the same results.

Under our current system, there is no way that this game is going to end well for any of us.  The only thing left to do is to extend the party for as long as possible, and that is precisely what our politicians have been doing for a long time.

But at some point “extend and pretend” simply won’t work anymore, and a day of reckoning for America will finally arrive.

via ZeroHedge News https://ift.tt/2ZQZho5 Tyler Durden

The pharmaceutical industry has been commercially harvesting blood from the Limulus Polyphemus-the Atlantic horseshoe crab for decades- for a very special reason: “blue gold” as it is called, can fetch tens of thousands of dollars per gallon, reported Bloomberg. 

The 450 million year crab was discovered in the 1960s to have unique blood that would revolutionize medicine. Unlike the blood of vertebrates, horseshoe crabs don’t use hemoglobin to carry oxygen throughout their body. Instead, they use hemocyanin, a protein that transports the oxygen, turns the blood blue, and has specialized immune cells that are extremely valuable.

Invertebrates like the horseshoe crab carry amebocytes instead of white blood cells in vertebrates. Amebocyte is the cell that has the medical community demanding more. When the cell comes into contact with a pathogen, it releases a chemical that causes the blood to clot, which is the mechanism for isolating dangerous pathogens.

The blue blood extracted from the horseshoe crab is called Limulus Amebocyte Lysate (LAL) and is worth its weight in gold. The blood can demand as high as $60,000 per gallon.

Once the blood is extracted, the horseshoe crabs are released back into the ocean. Estimates show that 15% to 20% die as a result of the process.

Bloomberg says horseshoe crab populations have collapsed by 80% in the last four decades.

A professor at the National University of Singapore invented a synthetic solution two decades ago that would substitute horseshoe crab blood. But it seems the pharmaceutical industry prefers to keep bleeding horseshoe crabs until they become instinct.

via ZeroHedge News https://ift.tt/2XbenrH Tyler Durden

Authored by Stephen Cohen via TheNation.com,

The Trump-Putin meeting in Japan is crucial for both leaders… and for the world…

Despite determined attempts in Washington to sabotage such a “summit,” as I reported previously, President Trump and Russian President Putin are still scheduled to meet at the G-20 gathering in Japan this week. Iran will be at the top of their agenda. The Trump administration seems determined to wage cold, possibly even hot, war against the Islamic Republic, while for Moscow, as emphasized by the Kremlin’s national security adviser, Nikolai Patrushev, on June 25, “Iran has been and will be an ally and partner of ours.”

Indeed, the importance of Iran (along with China) to Russia can hardly be overstated. Among other reasons, as the West’s military alliance encroaches ever more along Russia’s western borders, Iran is a large, vital non-NATO neighbor. Still more, Teheran has done nothing to incite Russia’s own millions of Muslim citizens against Moscow. Well before Trump, powerful forces in Washington have long sought to project Iran as America’s primary enemy in the Middle East, but for Moscow it is a necessary “ally and partner.”

In normal political circumstances, Trump and Putin could probably diminish any potential US-Russian conflict over Iran—and the one still brewing in Syria as well. But both leaders come to the summit with related political problems at home. For Trump, they are the unproven but persistent allegations of “Russiagate.” For Putin, they are economic.

As I have also previously explained, while there was fairly traditional “meddling,” there was no “Russian attack” on the 2016 American presidential election. But for many mainstream American commentators, including the editorial page editor of The Washington Post, it is an “obvious truth” and likely to happen again in 2020, adding ominously that Trump is still “cozying up to the chief perpetrator, Russian President Vladimir Putin.” A New York Times columnist goes further, insisting that Russia “helped to throw the election” to Trump. Again, there is no evidence whatsoever for these allegations. Also consider the ongoing assault on Attorney General William Barr, whose current investigation into the origins of “Russiagate” threatens to conclude that the scandal originated not with Russia but with US intelligence agencies under President Obama, in particular with the CIA under John Brennan.

We should therefore not be surprised, despite possible positive national security results of the Trump-Putin summit in Japan, if the US president is again widely accused of “treason,” as he so shamefully was following his meeting with Putin in Helsinki in July 2018, and as I protested at that time. Even the Times’ once-dignified columnist pages thundered, “Trump, Treasonous Traitor” and “Putin’s Lackey,” while senior US senators, Democrat and Republican alike, did much the same.

Putin’s domestic problem, on the other hand, is economic and social. Russia’s annual growth rate is barely 2 percent, real wages are declining, popular protests against officialdom’s historically endemic corruption are on the rise, and Putin’s approval rating, while still high, is declining. A public dispute between two of Putin’s advisers has broken out over what to do. On the one side is Alexei Kudrin, the leading monetarist who has long warned against using billions of dollars in Russia’s “rainy day” funds to spur investment and economic growth. On the other is Sergei Glaziev, a kind of Keynesian, FDR New Dealer who has no less persistently urged investing these funds in new domestic infrastructure that would, he argues, result in rapid economic growth.

During his nearly 20 years as Kremlin leader, Putin has generally sided with the “rainy day” monetarists. But on June 20, during his annual television call-in event, he suddenly, and elliptically, remarked that even Kudrin “has been drifting towards” Glaziev. Not surprisingly, many Russian commentators think this means that Putin himself is now “leaning toward Glaziev.” If so, it is another reason why Putin has no interest in waging cold war with the United States—why he wants instead, indeed even needs, a historic, long-term détente.

It seems unlikely that President Trump or any of the advisers currently around him understand this important struggle—and it is a struggle—unfolding in the Russian policy elite. But if Trump wants a major détente (or “cooperation,” as he has termed it) with Russia, anyone who cares about international security and about the well-being of the Russian people should support him in this pursuit. Especially at this moment, when we are told by the director of the United Nations Institute for Disarmament Research that “the risks of the use of nuclear weapons…are higher now than at any time since World War Two.”

via ZeroHedge News https://ift.tt/2Xdnw3c Tyler Durden

Gold’s recent rally isn’t just paying off for investors, it’s also creating a tailwind for gold buyers, as trading and sales of old jewelry has picked up as a result of the commodity’s price increase, according to Bloomberg.

Empire Gold Buyers saw business activity climb to its highest since 2011 and House of Kahn Estate Jewelers saw trading of old jewelry up by almost half since last week after the Fed mentioned that it may be open to cutting interest rates last week. This caused gold bullion prices to rise.

About $4.9 billion was added to gold-related exchange traded funds this month, including a record daily inflow into GLD. Meanwhile, gold refiners and recyclers are benefiting from the rally after years of little to no interest in the precious metal.

Empire Gold Buyers CEO Gene Furman said: 

“People are coming out of the trenches. Cartier, Rolexes, Tiffanys, Van Cleefs: we see an uptick in the luxury market because people need to raise money.”

Gold now looks as though it has permanently settled over a key resistance price point at $1400 per ounce. The continued speculation that the Fed may cut rates has helped gold sustain its recent rally to six-year highs.

In addition, the metal has drawn the interest of speculators. Open interest in outstanding gold futures is up 26% this month, the most in almost 2 years. ETF holders added nearly 86 metric tons to their assets this year.

And Goldman Sachs analysts believe that the metal could rally above $1600 an ounce with ETF holdings climbing by 800 tons through September.

Tobina Kahn of House of Kahn Estate Jewelers said: “The tides are turning big time. As a gemologist, I’m a buyer, if I can see that gold is continuing to go up, I’m more confident about paying more for it than having it go down.”

via ZeroHedge News https://ift.tt/2XipWh2 Tyler Durden