Who Got Hit: Here Are The Best And Worst Performing Hedge Funds Of 2018

February is barely half-way done, and it is already shaping up as the worst month in history for most quant, CTA and managed futures funds since the great quant blow up of August 2007. And not only: a quick look at the best and worst performers so far in 2018 shows a distinct skew to the downside, with the worst performing hedge fund down 25% in 2018 compared to the 14.5% return for the best.

However, as we have extensively discussed recently, by far the worst hit were the various quant, stat-arb, momentum and trend following funds: here the bloodbath was almost unprecedented as the following snapshot of quant/systematic/managed futures funds in the latest HSBC report demonstrates.

Finally, here is our usual universe of some of the most recognizable, marquee hedge fund names, sorted by MTD performance as of mid-February. It is clear that almost none of the “hedge” funds was hedged for the events that took place in the week of February 5. And yes, it is hardly ironic that as recently as 3 weeks ago, the famously named Tulip-Trend Fund was one of the best performing hedge funds of the year, before promptly crashing to worst.

via Zero Hedge http://ift.tt/2ofpEnu Tyler Durden

Bill Blain: “Is This Really The Last Chance To Sell?”

Blain’s Morning Porridge, submitted by Bill Blain of Mint Partners

“Most Winter Olympic Sports are about staying alive. Curling is about staying awake.

Last chance to sell? Or time to change approach?

Do we have a theme emerging for this week? Latvian ECB Governing Council Member Ilmars Rimsevics is being investigated for corruption and bribery. This morning it’s the Greek ECB member Yannis Stournaras under the cosh and facing the bright lights over the Novartis bribery and drugs scandal estimated to have cost the country a staggering €23 billion. That’s a seriously grown up amount of money for a country as broke as Greece. What are they going to do about it?

Back on Planet Sensible, I was asking round the trading desks this morning for any particular themes or issues they’ve been picking up from clients. Nobody seems to be enjoying February.

You must understand my colleagues and crew are a hard-bitten crowd of former investment bankers, traders and other financial desperados who’ve spent careers up to their eyeballs in financial mayhem and gore… “Last chance to sell,” was the answer from one particular cynic.

As the 10-yr Treasury continues to flirt with a 3% yield, the 2 yr trades up to 2.25%, while the bid-cover on y’days auction was “unconvincing”, and stock markets remain as wobbly as a jelly that’s been injected with extra-wobbly super wobbly-gel, one has to wonder if he’s right? What are the prospects for markets? I’m afraid my guess is no better than anyone else’s.

However, I do have a strategic outlook.

I don’t buy the recession around the corner arguments. The world has changed. We don’t have to fear an oil shock – US producers can cover any OPEC action and only get richer if the price rises. Nor are we likely to see the classic “Fed Murders Recovery” mistakes – the fear central banks will make policy mistakes, and kill growth thru over aggressive tightening. (Even if they hike rates significantly, they will remain well below trend.) Its far more likely cautious central banks will err on the side of accommodation. (I can hear a scream of disbelief as seasoned market watchers read that line – its market rote that central bankers always get it wrong. This time I suspect they will err this side of loose (which is a reason to fear inflation…)

Inflation risks are real. Financial Asset prices are greatly inflated as a result of QE and ultra-low interest policy. A few years ago we feared deflation – and saw it across commodities – as breakeven inflation declined. This has all changed. China has largely completed its pivot from growth to consumer economy – addressing its economic and environmental issues – meaning the outlook for commodities improves. Inflation forecasts have risen dramatically – see the attached graph from my Macro Economist Martin Malone. Inflation fears are manageable – will central banks over-react? Not this time. Too much would be at stake.

In terms of financial assets, its no wonder bond yields are rising – we’ve got pretty solid economic performance and indicators around the globe. Many economies are at full employment. Even in Europe where employment is improving but is still only at crisis levels were running into structural constraints. Key factors will include the perception of rising inflation risks, expectation of tighter policy and the yield curve making a bear step-up. Growth is rising, fiscal spending is back in vogue.

Which leads us to the stock market – which now looks to have peaked, or certainly become less frothy. If you buy the global growth scenario, then why not higher stocks? However, much of that is priced in. The upside looks limited by inherent volatility.

So, my current strategy is two fold:

  • First; stick with my alternatives view: buy real assets linked to global growth: infrastructure, utilities, renewables, transport etc. And in that subset, be thinking about opportunities in EM and other niches – where rising growth acts as a serious multiplier effect.  
  • Second; protect against inflation with assets that move in line with inflation (see above).

If only it was so simple…

 

via Zero Hedge http://ift.tt/2EXidL2 Tyler Durden

High School Students Call For Assault Weapons Ban During Tallahassee Rally

Students from Marjory Douglas Tillman high school – the location of the Feb 14th school shooting that left 17 dead and more than a dozen wounded – traveled to Tallahassee, the capitol of Florida, for a rally in support of a ban on automatic weapons like the AR-15 rifle that shooter Nikolas Cruz purchased legally and used to carry out his murderous spree, per Reuters.

Vigil

But as celebrities like George Clooney and Oprah Winfrey make financial pledges to support the movement, elsewhere in Florida, the push for an assault weapons ban has effectively stalled after local Republican lawmakers have already blocked one such bill. In fact, Florida’s legislature has taken up at least two bills during its current session intended to provide broader access to guns.

But signaling a possible shift, state Senator Bill Galvan, the chamber’s next president, called for a bill to raise the legal age limit for purchasing assault rifles from 18 to 21, the same as it is for handguns. The legislature’s current session ends on March 9, leaving little time for a vote.

* * *

Last week’s shooting appears to have spawned a national movement of students marching for stricter gun control laws. Students are planning national walkouts next month, and are also trying to organize a meeting with President Donald Trump.

So far, the event that has generated the most interest is being called the “March for Our Lives” and is slated for March 24 in Washington, D.C., spearheaded by some Parkland students.

“We’re here to make sure this never happens again,” Diego Pfeiffer, a senior at Stoneman, told a crowd that included hundreds of students from a Tallahassee high school on Tuesday after arriving at the capital.

Per Reuters, a Washington Postal News opinion poll released on Tuesday showed 77% of Americans believe the Republican-dominated US Congress is doing too little to prevent mass shootings, while 62% say President Trump hasn’t done enough on that front.

Students and parents elsewhere in Florida and in other states, including Tennessee and Minnesota, staged sympathy protests on Tuesday. Miami’s WTVJ-TV showed video of about 1,000 teens and adults marching from a high school in Boca Raton to the site of the Parkland shooting, about 12 miles (20 km) to the west.

Gun violence on public school and college campuses has become so common in the United States – indeed, most school shootings barely break into the national news – during the past several years that education officials regularly stage drills to train students and staff about what they should do in the event of a mass shooting on school grounds.

Separately, as reported last night, it has emerged that even Florida’s teachers’ pension funds was invested in the company that manufactures the weapon that Cruz used during his shooting spree.

Meanwhile, as Bloomberg reported this morning, it was business as usual at a Miami gun show just days after the shooting:

Three-in-10 American adults own a gun, and three-quarters of them think that doing so is fundamental to their sense of freedom, according to a 2017 Pew poll. This engrained culture of gun rights was on display over the weekend, where it was business as usual at a Miami-area gun show. Merchants displayed hunting knives, tactical gear, and semiautomatic assault rifles, including the same AR-15 model used by 19-year-old Nikolas Cruz, just an hour north, at Marjory Stoneman Douglas High School, in neighboring Broward County. At the Miami weapons bazaar, parents pushed babies up and down aisles of carefully stacked magazines and ammo; older children played with toy firearms.

Gun shows are a staple in the American firearms community, with several thousand held annually. Gun control activists have called for closing the “gun show loophole,” which allows some gun sellers to perform a transaction without running a background check on the buyer. According to data collected by Pew, the majority of gun owners, 77 percent, advocate ending the loophole, but a proposed bill to do just that found little traction in Congress when it was introduced last March.

Indeed, the state of gun control legislation appears to be divorced from public sentiment. According to the Pew poll, among gun owners, 89 percent support a proposal that would prevent the mentally ill from purchasing a gun, 82 percent support barring those on the no-fly list from buying guns, 54 percent support a federal gun sales database, and 48 percent support a ban on assault-style weapons such as AR-15s. These measures, though, often dissipate in the legislation process. Congress, which promised a bipartisan bump stock ban after the device was used in the Las Vegas shooting, failed to deliver. On Tuesday, Trump signaled a willingness to consider a bump stock ban, directing his attorney general, Jeff Sessions, to draft rules prohibiting the accessories.

* * *

In response to last week’s tragedy, earlier this week, President Trump directed Attorney General Jeff Sessions to write up a memorandum banning bump-stock sales after the device was famously used by the Las Vegas shooter, Stephen Paddock, to massacre dozens of people at a country music festival back in October.

And the president probably surprised millions of members of his base late last night when he tweeted his support for the bipartisan bill – first introduced late last year – to strengthen the system used for federal background checks.

As a reminder, a federal ban on assault weapons, in force for 10 years, expired in 2004. Given the series of high-profile mass shootings that we’ve witnessed in recent weeks, the national gun control movement has gained a newfound momentum not seen since Sandy Hook. The question however remains: despite the president’s assurances, will anything actually change?

via Zero Hedge http://ift.tt/2HyDjy0 Tyler Durden

Futures, European Stocks Slide After Poor PMIs; Dollar Gains Ahead Of Fed Minutes

The dollar rose to its highest level in a week against its G10 peers on Wednesday, rising for the 4th day against the yen and most pairs as investor focus shifted to the minutes of the Federal Reserve’s last policy meeting.

The dollar hasn’t had it this good this year, bouncing 1% so far this week after slumping 1.5% last week to the lowest level in 3 years, as traders unwound short positions ahead of today’s January FOMC minutes (where the most likely surprise would be the Fed‘s endorsement of 4 rate hikes in 2018), with investors looking for clues on just what policy makers had in mind when they added “further” twice to their guidance on interest rates.

After yesterday’s bond supply deluge, Treasury yields in the belly were steady ahead of the continued glut of supply this week, and the 10Y traded virtually unchanged and just shy of 2.89%. The Treasury’s $258 billion of auctions slated for this week comes amid a rapid jump in rates that gave impetus to one of the steepest equity sell-offs in years two weeks ago. And while investors seem to have adjusted to 10-year yields at a four-year high for now, the deluge of supply could push them even higher, above 3%, weakening the case for owning stocks at elevated valuations.

Meanwhile, US futures and world stocks looked set to fall for a third straight day: MSCI’s world stock index down 0.1%, declining for the 3rd day, as a down day in Europe offset earlier gains in Asia.

Investor attention will be on the minutes of the Fed’s last policy meeting in late January. The last readings of U.S. wages and inflation came in higher than expected, with some blaming the numbers for prompting a violent selloff in stocks earlier this month.

“Markets are particularly sensitive to inflation, and we think the odds that the minutes reinforce the narrative of firming inflation are high,” said Elsa Lignos, RBC’s global head of FX strategy. “We think there is a high probability that the Fed moves the dots to four hikes in 2018 (from three) near-term and that the minutes could be another step in that direction.”

* * *

In Europe, almost every sector of the Stoxx 600 Index fell, with the gauge tracking losses in the U.S. on Tuesday rather than a more positive mood in Asia after Markit data showed a fading outlook for manufacturing and services in the region, prompting some to ask if the recovery momentum has now peaked. The risk-off tone permeating European trading came as PMI data missed estimates across the board, first in France, then Germany and finally for the whole EU:

  • Euroarea PMI Manufacturing 58.5 vs. Exp. 59.2 (Prev. 59.6)
  • Euro-area PMI Services 56.7 vs. Exp. 57.6 (Prev. 58.0)
  • Euro-area PMI Composite 57.5 vs. Exp. 58.5 (Prev. 58.8)

European equities led lower by technology, while FTSE 100 outperforms slightly after earnings from Lloyds and Glencore.  In terms of sector specifics, telecoms outperform their peers amid strong earnings from Orange (+2%), to the downside, energy names lag their peers amid price action seen across the commodities complex. Other individual movers include Glencore (+4.1%), Lloyds (+1.6%) and who sit near the top of the FTSE 100 following their respective earnings. Elsewhere, other notable movers include Accor (+2.4%), Atos (-3.7%) and Iberdrola (-3.4%) post-earnings, whilst AA (-22.1%) lag the Stoxx 600 after a disappointing strategy update.

Lower than expected readings of purchasing manager surveys in France, Germany and the euro zone all came in lower than expected, stabilizing euro zone bond markets. Bunds rallied from the open across the curve; UST/bund 10-year spread widens toward key 220bps level, which was last seen in January 2017. 

* * *

Earlier during the Asian session, MSCI’s index of Asia-Pacific shares outside Japan rose 0.7 percent after slipping earlier in the session following the U.S. market losses, which snapped a six-session winning streak. Stocks climbed in Hong Kong ahead of China’s return from the week-long Lunar new year holiday on Thursday, cementing a rebound from one of the worst sell-offs in years at the start of the month.  As the Asian session progressed a combination of the fall in US equity futures and 1% declines in crude prices, the Nikkei had briefly dipped into negative territory. Elsewhere, the ASX 200 (+0.1%) had opened lower in response to the falls on Wall Street but has recovered into positive territory. Mining names the largest drag on the index with BHP and Fortescue both losing ground following soft earnings. Hang Seng (+1.8%) traded higher amid HSBC shares recovering from yesterday’s declines.

In FX, after soft U.K. domestic employment report, GBP/USD extends losses through yesterday’s low while gilt futures hit two-week high. The euro traded in a narrow range that was yawn-inducing for traders even though euro-area PMI missed estimates, while the pound was buffeted by weak jobs data out of the U.K. EUR/USD edges lower to approach 1.2300 as USD continues strength seen from last three sessions. However, not even the weaker Euro could push European stocks higher.

Asia’s emerging currencies were mostly lower amid a rising dollar and elevated Treasury yields. The Taiwan dollar the main exception as it reopened after the Lunar New Year holidays. Sovereign bonds advanced and Taiwan led regional stock gains. A deluge of new supply is pushing down Treasuries and spurring speculation the U.S. 10-year yield could breach the watershed 3 percent level as early as this week, which would reduce the attractiveness of developing-nation assets. The Federal Reserve will release minutes of its latest meeting later on Wednesday.

“The ongoing USD rebound alongside higher UST yields is likely to pressure Asian currencies,” said Mizuho’s FX strategist, Ken Cheung. “With a light calendar, the USD movement will remain the main driver for the Asian FX. The CNY fixing after the long holiday will be the focus,” with recent developments suggesting no big changes, he said.

In the neverending drama surrounding Brexit, a UK Official said they are in a broad alignment with the EU on the transition period. Meanwhile, PM May is facing pressure after 62 Tory hardliners demand clean Brexit, with lawmakers challenging May to take a harder approach on how far UK rules should move away from the EU after Brexit and the nature of the transition period.

The stronger dollar weighed on commodities, with Brent crude futures losing 1 percent to $64.61 per barrel and U.S. crude oil futures also slipping 1 percent to $61.16. U.S. crude hit a near two-week high the previous day on news of inventory declines at a key storage hub and from expectations that top OPEC producers could extend cooperation beyond 2018. Spot gold touched a one-week low of $1,329.42 an ounce due to the resurgent dollar, having declined 1.4 percent so far this week.

On today’s economic data calendar, we have Markit PMI data and home sales. Scheduled earnings include Dish and The Southern Company.

Bulletin headline Summary from RanSquawk

  • European equities (Eurostoxx 50 -0.7%) trade lower across the board amid lacklustre Eurozone PMIs and a dip in US equity futures
  • USDJPY has built on gains above the 2017 low (107.32), but stalled just before 108.00 amidst another bout of global stock market weakness
  • Looking ahead, highlights include Eurozone and US PMIs, US existing home sales, FOMC minutes and a slew of speakers

Market Snapshot

  • S&P 500 futures down 0.07% to 2,712.00
  • STOXX Europe 600 down 0.5% to 378.62
  • MSCI Asia Pacific up 0.3% to 177.20
  • MSCI Asia Pacific ex Japan up 0.9% to 581.18
  • Nikkei up 0.2% to 21,970.81
  • Topix down 0.05% to 1,761.61
  • Hang Seng Index up 1.8% to 31,431.89
  • Shanghai Composite up 0.5% to 3,199.16
  • Sensex up 0.4% to 33,821.09
  • Australia S&P/ASX 200 up 0.05% to 5,943.72
  • Kospi up 0.6% to 2,429.65
  • German 10Y yield fell 3.0 bps to 0.705%
  • Euro down 0.1% to $1.2321
  • Brent Futures down 0.9% to $64.67/bbl
  • Gold spot unchanged at $1,329.24
  • U.S. Dollar Index up 0.2% to 89.86
  • Italian 10Y yield rose 2.6 bps to 1.8%
  • Spanish 10Y yield fell 0.6 bps to 1.525%

Top Overnight News from Bloomberg

  • Lloyds to Invest $4.2 Billion in Technology, Plans Share Buyback
  • Glencore M&A Firepower Undiminished After $2.9 Billion Dividend
  • Prime Minister Theresa May is facing a potentially dangerous outcry from 62 members of her own party who are demanding a quick, clean break from the European Union, just as she tries to finalize her Brexit plans
  • Japanese Lifers: Meiji Yasuda Life (AUM $353b): increasing holdings of unhedged U.S. debt; investing mostly in Ginnie Mae, some in credit and Treasuries
  • ECB’s Vasiliauskas: we have not seen an unwarranted tightening in conditions; appropriate to rephrase guidance to focus on all instruments, not just QE: Reuters
  • U.K. Dec. Unemployment Rate: 4.4% vs 4.3% est; Avg. Weekly Earnings 2.5% vs 2.5% est.
  • Apple Is Said to Negotiate Buying Cobalt Direct From Miners
  • Democrats Counter GOP Tax-Cut Pitch by Warning of Long-Term Pain
  • Unibail Says Malls Will Evolve to Counter the Threat of Amazon
  • Gibson Creditors Are Said to Want New CEO Before Rescue Deal
  • Brexit Secretary David Davis will set out U.K.’s official response to EU’s transition proposals before the U.K. parliament in a written statement on Wednesday, Politico reports; Davis to demand mechanism to protect U.K. from any “harm” caused by new EU rules and regulations introduced during transition period
  • Merck to Purchase Viralytics in Deal Valued at A$502m
  • Takeover Target Fidessa Gains as Activist Elliott Reveals Stake
  • AA Shares Plunge Most Since Debut After Predicting Profit Drop
  • Output of Faulty Airbus Engine to Double, Suggesting Likely Fix
  • A preliminary composite purchasing managers’ index for the euro-zone retreated in February to 57.5, from 58.8, and missing the median estimate of 58.4

Asian equities are trading with modest gains this morning, in what has been a relatively quiet session. Nikkei 225 (+0.2%) had been up as much as 1.2% with the JPY continuing to weaken across the board in which USD/JPY hovering around 1.08. Although, as the session progressed a combination of the fall in US equity futures and 1% declines in crude prices, the Nikkei had briefly dipped into negative territory. Elsewhere, the ASX 200 (+0.1%) had opened lower in response to the falls on Wall Street but has recovered into positive territory. Mining names the largest drag on the index with BHP and Fortescue both losing ground following soft earnings. Hang Seng (+1.8%) traded higher amid HSBC shares recovering from yesterday’s declines. In credit markets, the US Treasury curve is modestly flatter in the Asia-Pacific session, with the 10-Year yield last 0.4bp higher at 2.89%. JGBs trading in a tight range, with the 10yr up by 3 ticks.

Top Asian News

  • Yen Surge Ends $353 Billion Insurer’s Wait to Buy U.S. Bonds
  • Hong Kong Shares Soar Ahead of China’s Return From Holiday
  • At Last, a Woman Takes Center Stage for India’s Tech Industry
  • How a $1.8 Billion Indian Bank Fraud Lasted Seven Years
  • Hong Kong Traders Return to Recent Listings as Razer Surges 24%

European equities (Eurostoxx 50 -0.7%) trade lower across the board amid lacklustre Eurozone PMIs and a dip in US equity futures overnight. In terms of sector specifics, telecoms outperform their peers amid strong earnings from Orange (+2%), to the downside, energy names lag their peers amid price action seen across the commodities complex. Other individual movers include Glencore (+4.1%), Lloyds (+1.6%) and who sit near the top of the FTSE 100 following their respective earnings. Elsewhere, other notable movers include Accor (+2.4%), Atos (-3.7%) and Iberdrola (-3.4%) post-earnings, whilst AA (-22.1%) lag the Stoxx 600 after a disappointing strategy update.

Top European News

  • U.K. Wages Pick Up as Fewer Foreign Workers Take Jobs
  • Berlusconi Poaching Among Five Star Ranks: Italy Campaign Trail
  • Euro Area Hits Speed Bump on Road to Faster Economic Growth
  • German Economy on Track for Fastest Quarterly Growth Since 2011
  • Black Sea Gas to Flood Nation That Can’t Decide on a Use for It

In currencies, Asian contacts are said to have attributed the latest Dollar leg-up to a further ‘technical correction’, and for the DXY 90.000 will be next on the radar given its psychological significance, but chart-wise nearest resistance resides between 90.500-600 as the index trades within a 89.935-700 range. Looking at basket components, Usd/Jpy has built on gains above the 2017 low (107.32), but stalled just before 108.00 amidst another bout of global stock market weakness. However, Jpy puts at the big figure have reportedly been in demand as the headline pair hovers around 107.50, with bids seen at 107.20. Eur/Usd is testing key Fib support at 1.2319 and buying interest into 1.2300 in wake of French, German and pan-EZ flash PMIs that missed consensus across the board. A downside break of 1.2300 exposes recent lows circa 1.2275 and stops below, but on the upside 1 bn option expiries run-off today between 1.2300-20. GBP initially faced selling pressure in the wake of the latest UK jobs figures despite the firmer than expected earnings ex-bonus release (prev. revised lower), with the report met by an unexpected uptick in the UK unemployment rate, slowdown in employment growth and the earnings release perhaps not enough to change the narrative at the BoE and nail on a May hike. However losses were then pared as it appears that the UK are now in a broad agreement with the EU on a transition period. Aud/Usd another notable mover, and retreating some distance from 0.7900 towards 0.7842 interim support despite former than forecast Aussie wages overnight as the breakdown was not as encouraging as the headline numbers appeared.

In the commodities complex, WTI and Brent crude futures are seen lower alongside the firmer USD after taking a tumble during Asia-Pac trade. In terms of energy specific newsflow, things remain light ahead of tonight’s rescheduled API release with traders wary over any further climbs in US production. In metals markets, spot gold has recovered from modest overnight losses to trade relatively unchanged as markets await today’s FOMC minutes release. Elsewhere, price action across the rest of the complex remains light as Chinese participants away are still away from market.

Looking at the day ahead, the flash February PMIs on manufacturing, services and composite are due in the US. Other data due includes January existing home sales data in the US. Away from this, the FOMC minutes from the January meeting are due late in the evening, while the Fed’s Harker is scheduled to speak on the economic outlook in the afternoon.

US Event Calendar:

  • 7am: MBA Mortgage Applications, prior -4.1%
  • 9:45am: Markit US Manufacturing PMI, est. 55.5, prior 55.5; Services PMI, est. 53.7, prior 53.3; Composite PMI, prior 53.8
  • 10am: Existing Home Sales, est. 5.6m, prior 5.57m; MoM, est. 0.54%, prior -3.6%
  • 2pm: FOMC Meeting Minutes

Central Bank Speakers

  • 9am: Fed’s Harker Speaks on the Economic Outlook
  • 10am: Kashkari speaks in Minneapolis on Bloomberg Television
  • 2pm: FOMC Meeting Minutes
  • 8:20pm: Kashkari speaks at Bloomberg event in Minneapolis

DB’s Jim Reid concludes the overnight wrap

Today is the biggest day in a quiet week for data. The highlight will be the flash February PMIs with manufacturing, services and composite readings due in Europe and the US. As a reminder, the January manufacturing reading for the Euro area came in at an impressive 59.6, albeit slightly down from the highs above 60 in December and November last year. The consensus is for another small pullback to 59.2, while the composite is expected to edge down to a still solid 58.4 from 58.8. Outside of this, we also see the monthly UK employment release with eyes on wages as the BoE gets closer to their next hike. UK data and/or BoE hawkishness has caused global yields to sell off sharply a couple of times in recent months so the release will be important. Finally FOMC minutes from the January meeting (Yellen’s last) will be out tonight but it will be outdated news given it occurred before the higher AHE’s and CPI/ PPI prints and before the market sell-off.

Staying with yields, the big focus over the last 24 hours has been this week’s large Treasury supply. Overnight the US treasury has sold US$179bn of debt securities with yields at its auctions of three / six month bills and two year notes
($28bn at 2.255%) reaching the highest in c10 years. Notably, demand for the securities were reasonably sound with bid-to-cover ratio of 2.74x, 3.11x and 2.72x (vs. 3.22x previous) respectively. Looking ahead, auctions for 5 and 7 year notes will occur in the next two days. Elsewhere, core 10y bonds yields were little changed, with the UST 10y up 1.5bp to 2.89% while Bunds were flat and Gilts fell 1.7bp. The UST 2y was up 2.9bp to 2.221% and is higher again this morning.

In US equities, the S&P fell for the first time in seven days (-0.58%) with all sectors but tech stocks modestly up. The index was weighted down by the consumer staples sector, in particular Walmart as it fell the most in c30 years (-10.2% vs. -10.3% in Jan. 1988) after guiding to a lower than expected earnings outlook and a slower push into online sales. The Dow (-1.01%) and Nasdaq (-0.07%) also retreated. Conversely, European bourses were broadly higher as the Euro weakened and largely reversed Monday’s decline. Across the region, the Stoxx (+0.60%) and DAX (+0.83%) both rebounded while the FTSE was marginally lower. Elsewhere, the VIX is up for the second straight day and now back up above 20 (+5.9% to 20.60).

This morning in Asia, markets are modestly higher, with the Nikkei (+0.05%), Hang Seng (+0.98%) and Kospi (+0.47%) all up as we type. Elsewhere, the February Nikkei manufacturing PMI eased mom to 54 (vs. 54.8 previous). Recapping other markets performance from yesterday, in FX, the US dollar index jumped 0.69% while the Euro and Sterling fell 0.56% and 0.03% respectively. In commodities, WTI oil rose for the fourth consecutive day (+0.39%). Precious metals weakened c1.3% (Gold -1.28%; Silver -1.34%) and other LME base metals also retreated modestly (Copper -0.39%; Zinc -0.14%; Aluminium -1.31%).

Away from markets, the Handelsblatt reported that given Germany’s strong support for Spain’s Economy Minister Luis de Guindos to be the next Vice President of the ECB, unnamed German officials now hope this would set the stage for Bundesbank’s Weidmann to be first ECB President from Germany after Mr Draghi’s terms ends in October 2019. According to these officials, the swing factor may depend on the relative support of French President Macron. Staying in Europe, the EC spokesman Ms Schinas said the EU is “deeply concerned” by any US trade sanctions impacting EU businesses. She added “we would be taking appropriate measures to defend EU industry, and we stand ready to react swiftly….in case our exports are affected by restrictive trade measures from the US”.

Now onto some of the Brexit headlines. When asked if the UK will withhold the divorce Brexit payment to achieve the trade deal that it wants with the EU, the Brexit Secretary Davis said the “withdrawal agreement and the future relationship (between the UK and EU) are intertwined….and not separate issues”. He also noted trade must be as open and “frictionless” as possible between the two sides and that the UK and the EU will continue to work together as partners on regulations, where the UK is determined “to lead a race to the top in global standards”. Elsewhere, Foreign Secretary Johnson has said “there is no reason” why the UK and EU can’t have frictionless trade if Britain leaves both the customer union and single market. Conversely, the opposition leader Mr Corbyn has confirmed the Labour Party will support Britain remaining inside a customs union. He noted “we have to have a customs union that makes sure we can continue to trade, particularly between Northern Ireland and the Republic of Ireland…” Looking ahead, we should have more clarity next week when PM May is expected to set out her vision for the post Brexit trade deal after extensive cabinet discussions this week. Her task has been made more difficult by an open letter from 62 Eurosceptic Tory MPs insisting on elements of a hard Brexit just as hope was emerging that she could find a united cabinet position.

Finally onto some central bankers commentaries. The Riksbank Deputy Governor Floden said “we have to be cautious moving forward not to surprise markets too much (on rates) and generate negative market reactions….for example…too rapid appreciation of the Krona”. He added, “most likely” we will raise repo rates in 2HCY18 and then “roughly 50bp per year under the forecast horizon”.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In Germany, the January PPI was above market at 0.5% mom (vs. 0.3%) and 2.1% yoy (vs 1.8% expected). The February ZEW survey on the current situation was lower than expected at 92.3 (vs. 93.9) with the expectations index beating at 17.8 (vs. 16 expected). For the Euro area, the February ZEW survey on expectations eased to 29.3 (vs. 31.8 previous) while consumer confidence was also below expectations at 0.1 (vs. 1.0) following a fresh 17 year high back in January. Finally, in the UK, the February CBI trend total orders were a tad softer at 10 (vs. 11 expected).

Looking at the day ahead, the flash February PMIs on manufacturing, services and composite are due in Germany, France and the Euro area. Later on we’ll then get the same data in the US. Other data due includes December and  January employment indicators in the UK, and January existing home sales data in the US. Away from this, the FOMC minutes from the January meeting are due late in the evening, while the Fed’s Harker is scheduled to speak on the economic outlook in the afternoon. The BoE’s Carney, Broadbent, Haldane and Tenreyro are also due to testify to Parliament’s Treasury Committee on the Inflation Report.

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In Unexpected Twist, Judge In Flynn Case Asks Mueller For “Exculpatory Evidence”

The federal judge assigned to the criminal case against Trump’s former National Security Adviser Michael Flynn has ordered Special Counsel Robert Mueller to turn over any “exculpatory evidence” to Flynn’s defense team. 

Oddly, however, Flynn’s legal team did not make this request. Instead, Judge Emmet G. Sullivan issued the order “sua sponte,” or at his discretion, invoking the “Brady Rule” – which requires prosecutors to turn over previously unfiled evidence that might have a material impact on a defendant’s case. Interestingly, two days before the order Mueller filed a motion for an agreed-upon protective order regarding the use of evidence in the case, including “sensitive materials,” provided to Flynn’s lawyers by the office of the Special Counsel.

Judge Emmet G. Sullivan

As The Hill notes, Sullivan dinged federal prosecutors in the trial of former Sen. Ted Stevens (R-AK) for misconduct in failing to turn over exculpatory evidence. 

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

Judge Andrew Napolitano addressed Sullivan’s decision on Tuesday, saying The judge on his own, not in response to any application from General Flynns lawyers says, “By the way, I want all exculpatory evidence, evidence that could help Flynn or hurt the government turned over to Flynns lawyers.

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

Adding to the odd turn of events in the Flynn matter is a February 1 report that Special Counsel Robert Mueller’s team has postponed Flynn’s sentencing due to the “status” of the investigation. 

Some have speculated that Mueller’s request indicates Flynn is cooperating with his investigation. Others, such as former federal prosecutor Joe diGenova, think that “It may very well be that the guilty plea cannot stand” after D.C. Judge Rudolph Contreras – who also sits on the FISA court and may have personally signed off on surveillance warrant(s) which ultimately included Flynn- recused himself days after he was assigned Flynn’s case.

Judge Rudolph Contreras, appointed by President Obama in 2012

Others have speculated that the FBI conducted an illegal interview of Flynn by not announcing that he was actually under investigation, and did not have an attorney present. 

And in a leaked account of former FBI Director James Comey’s March 2017 closed door briefing to Congressional  investigators, Comey told lawmakers that the FBI agents who interviewed Flynn did not believe he had lied to them, and as a result, “some of those in attendance came away with the impression that Flynn would not be charged with a crime.” 

Meanwhile, if we’re to entertain rumors and speculation, Judge Sullivan’s decision on the exculpatory evidence may have something to do with Andrew McCabe’s firing and rumors of changed “302” forms – which is the paperwork an FBI agent fills out discussing the content of an interview. 

Journalist Sara Carter – known of late for her access to leaks by “white hat” actors in the intelligence community, sat down with Sean Hannity in late January where she discussed McCabe’s firing and suggested “there’s indicators right now that McCabe may have asked FBI agents to actually change their 302’s” 

Carter: What we know tonight is that FBI Director Christopher Wray went Sunday and reviewed the four-page FISA memo. The very next day, Andrew McCabe was asked to resign. Remember Sean, he was planning on resigning in March – that already came out in December. This time they asked him to go right away. You’re not coming into the office. I’ve heard rep[orts he didn’t even come in for the morning meeting – that he didn’t show up.

Hannity: A source of mine told me tonight that when Wray read this, it shocked him to his core.

Sara Carter: Shocked him to his core, and not only that, the Inspector General’s report – I have been told tonight by a number of sources, there’s indicators right now that McCabe may have asked FBI agents to actually change their 302’s – those are their interviews with witnesses. So basically every time an FBI agent interviews a witness, they have to go back and file a report. 

Hannity: Changes? So that would be obstruction of justice? 

Carter: Exactly. This is something the Inspector General is investigating. If this is true and not alleged, McCabe will be fired. I heard they are considering firing him within the next few days if this turns out to be true. 

 

Was McCabe fired because the 302’s filed in the Flynn interview were altered as some have suggested?

Flynn, who has been cooperating with Mueller’s investigation, was forced to resign as Trump’s National Security Advisor last February after leaks from U.S. intelligence revealed he lied to Vice President Mike Pence about perfectly legal and to-be-expected conversations he had with Russian ambassador Sergey Kislyak during the transition. 

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Merkel Is Forming A Coalition With The Wrong Party

Authored by Tom Luongo,

The last time I looked at the miasma of German coalition talks the big takeaway was the mood turning against the Social Democrats (SPD).

Today the latest polling confirms that the more Merkel tries to form a coalition with Martin Schultz and the SPD the more support the coalition loses.

There have been two polls recently, one which grabbed headlines showing that anti-immigration, Eurosceptic Alternative for Germany (AfD) is now ahead of the SPD nationally, 16% to 15.5%.  Another has AfD rising two points to 14%, though still four points behind the SPD.

The takeaway from these polls is not whether AfD is or is not more popular than the SPD at this point.  Coupling those results with the surprising rise of Angela Merkel’s Union party by two points in both polls a clear message from the German electorate emerges.

They want a government formed because they are unaccustomed to being without one, but they don’t want another grand collation between Merkel and the SPD.

That is the kind of formless, opinion-allergic government the German people are sick of.  They had that for the past four years and all it got them was more subservience to both Brussels and Washington D.C.

No, since Merkel has staunched the flow of immigrants into Germany – to help her re-election campaign – her leadership is, for now, acceptable to get things done.  But, what the German people are telling everyone is that they want her to shift farther ‘right’ rather than left in order to appease the SPD.

And that means a coalition with AfD, which, of course, is not possible with the current political leadership in Germany.  And that’s why AfD continues to take a larger bite out of the electoral pie.

Don’t Believe the Numbers

A new article over at the American Conservative by Doug Bandow goes into some great detail on the dynamics at play here.  He rightly points out that Germans are unhappy with the current status quo.

While no one doubts Merkel’s leadership, it is in service of a goal that is orthogonal to the desires of Germans.  German rejection of the openly Brussels-First Schultz is prima facia evidence of this.  Having Schultz gain significant concessions from Merkel in coalition talks may be good for SPD politicians in the short run.

They will get to distribute billions in new programs to buy votes with.  But, it will come at the expense of ceding greater control over Germany’s future to Brussels, since Schultz is resolutely in favor of the United States of Europe model for the European Union.

But, at the same time, I feel that Bandow makes the mistake of taking the current polling at its word.  As I said, part Merkel’s support comes from her willingness to form some majority government.

So, if that fails because the SPD rank and file vote against the coalition agreement then don’t expect the 30-32% support for the Union party to hold.  Other polls have shown more than two-thirds of Germans want Mrs. Merkel to step aside as Chancellor.

Bandow’s argument is that Germans won’t get what they want in an new election because the polls indicate similar results to what we’re currently seeing.  I disagree.

Because I don’t feel like the powers behind the scenes in Europe will allow Merkel to step aside.  They will continue to ply false choices to German voters in the hopes that they can create an acceptable outcome.

This was the strategy in 2017, using the already hated Schultz as Merkel’s stalking horse and help her cross the finish line with just enough support to continue as Chancellor.  It nearly worked.  The problem was that AfD and the other minor parties took the SPD’s losses, not the Union.

And that trend is still in place today.

So, the more likely outcome is that support for AfD will surge a minimum of three to four points (if not more) as Union support collapses.  This will be a minimum.  If Merkel doesn’t step aside the shift will be bigger, with AfD moving solidly above the 20% mark, taking points from the Union.

The Union Divide

At that point CSU leader and Bavarian Governor, Horst Seehofer, will have a major decision on his hands.  He could split the CDU/CSU at that point and a grand rearrangement of the board could take place.

We’re headed for an iceberg in Italy’s elections, which have tremendous bearing on the German political dynamic.  Germans do not want to bail out Italy or anyone else.  And a result in Italy in two weeks could easily bring a coalition to power hell bent on confrontation with Germany over Italy’s debt situation, which is unsustainable.

As I said a month ago:

So, unless there is the political will to consolidate all of Europe’s debt under one roof, this problem lands squarely at the feet of the ECB, the Bundesbank and the farce that is German politics.

This puts the decision on the Troika – The ECB, The IMF and the European Commission — to bail them out directly or kick Italy out of the euro.  And that’s smart politics.  Make Brussels the bad guy.  And [Lega Nord Leader Matteo] Salvini is already playing that tune perfectly.

If they were all smart, they would have the Lira ready to deploy if things go south.

So, a second round of elections that strengthens the hand of German nationalists is exactly what Merkel and Schultz are trying to avoid with this grand coalition farce.  And the German people are beginning to see things clearly.

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Swedish Authorities Fear “Negative Spiral” As Society Goes Cashless ‘Too Fast’

In 1660, Sweden’s Riksbank was the first central bank in the world to issue paper currency.

In 2016, Sweden began to accelerate its transition from cash to digital currency.

At the time, Deputy Riksbank Governor Cecilia Skingsley warned:

“We need to do the homework because it’s not an option for the public sector to stay on the sidelines and see the private sector cut off access to central bank money for individuals.”

A year later, in 2017, cash in circulation was plummeting and establishment economists celebrated the battle in the war on cash.

Additionally, Riksbank was actively looking toward cryptocurrencies as potential government-backed money.

But now, in 2018, Swedish officials are worried that too much (or too little in this case) is a bad thing warning:

“If this development with cash disappearing happens too fast, it can be difficult to maintain the infrastructure” for handling cash.

As Bloomberg reports, Sweden is widely regarded as the most cashless society on the planet. Most of the country’s bank branches have stopped handling cash; many shops, museums and restaurants now only accept plastic or mobile payments.

But there’s a downside, since many people, in particular the elderly, don’t have access to the digital society.

“No cash accepted” signs are becoming an increasingly common sight in shops and eateries across Sweden as payments go digital and mobile.

Last year, the amount of cash in circulation in Sweden dropped to the lowest level since 1990 and is more than 40 percent below its 2007 peak. The declines in 2016 and 2017 were the biggest on record.

But the pace at which cash is vanishing has authorities worried.

“One may get into a negative spiral which can threaten the cash infrastructure,” Mats Dillen, the head of the parliamentary review, said.

“It’s those types of issues we are looking more closely at.”

Riksbank Governor Stefan Ingves has said Sweden should consider forcing banks to provide cash to customers. In its annual report on Monday, the Riksbank said the question is what role it should play in a future with even fewer cash payments.

“The Riksbank is carefully analyzing this development,” Ingves said.

“Overall, I think we are facing structural changes in areas that have previously been stable. This is a development which will affect all the Riksbank’s departments and we will need to make strategic decisions regarding the way forward.”

If you have any misguided notion that a cashless society is not coming, just keep telling yourself that every time you use a debit card, credit card or your phone for your next purchase. With the elimination of cash we effectively hand over our individual human sovereignty to the banks and the government.

*  *  *

Finally we leave you with Harvard’s latest study on which nations would ‘benefit’ the most from going cashless

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Meet The Italian Government’s Orwellian New Automated Tax Snitch

Authored by Simon Black via SovereignMan.com,

By the end of the 3rd century AD, the finances of ancient Rome were in terminal crisis.

Years and years of debasing the currency had resulted in severe hyperinflation– a period of Roman history known as the Crisis of the Third Century (from AD 235 through AD 284).

During the time of Julius Caesar, for example, the Roman silver denarius coin was nearly 98% pure silver.

Two centuries later in the mid-100s AD, the silver content had fallen to 83.5%.

And by the late 200s AD, the silver content in the denarius was just 5%.

As the money continued to be devalued, prices across the Empire skyrocketed.

Wheat, for example, rose in price by over 4,000% during the first three decades of the third century.

Rome was on the brink of collapse. And when Emperor Diocletian came to power at the end of the third century, he tried to stabilize the economy with his ill-fated Edict on Wages and Prices.

Diocletian’s infamous decree fixed the price of everything in the Empire. Food. Lumber. Salaries. Everything.

And anyone caught violating the prices set forth in his edict would be put to death.

Another one of Diocletian’s major policies was reforming the Roman tax system.

He mandated widespread census reports to determine precisely how much wealth and property each citizen had.

They counted every parcel of land, every piece of livestock, every bushel of wheat, and demanded from the population increasing amounts of tribute.

And anyone found violating this debilitating tax policy was punished with– you guessed it– the death penalty.

Needless to say, Diocletian’s reforms didn’t work.

Every high school economics student knows that wage and price controls don’t work… and that excessive taxation bankrupts the population.

But that doesn’t stop governments from trying the same tactics over and over again.

Fast forward about seventeen centuries and Italy is once again in the same boat.

The Italian government is one of the most bankrupt in the world; its debt level is an unbelievable 132% of GDP– and rising.

In other words, the Italian government’s debt is substantially larger than the value of the entire Italian economy.

It’s almost as bad as Greece, and it grows worse each year as the national government routinely runs budget deficits.

Their only solution, of course, is hiking taxes and increasing regulation… exactly the opposite of what they should be doing.

And, just like the ancient Romans, the government is on a witch hunt for anyone they think (in their sole discretion) might be dodging taxes.

They already have a system in place called the redditometro, an automated tool for the tax authorities to comb through income and expense records of Italian residents.

The algorithm finds anyone whose expenses were higher than his/her income and presumes that s/he has been evading taxes.

The irony here is pretty profound given that the Italian government itself has expenses that are higher than its income.

After all, that’s how it ended up with such a prodigious debt level.

Earlier this month, however, the Italian tax authorities rolled out a brand new tool called risparmiometro. And this one is really insidious.

Risparmiometro goes through ALL financial records – credit card transactions, bank accounts, investment accounts, etc. to determine whether or not someone has too much savings relative to his/her occupation.

Think of the implication.

Under the redditometro system, if you spend too much money, they think you’re evading taxes.

But under the risparmiometro system, if you save too much money, they think you’re evading taxes.

Unbelievable.

But it gets better.

Risparmiometro (the new tool) also looks at bank activity to see how frequently you’re using the account.

And if you’re not using the account frequently enough, the government assumes that it’s because you’re dealing in cash… and evading taxes.

I have no doubt that there’s a substantial amount of tax evasion in Italy.

I spend several weeks in the country every summer, and I see how much people and businesses are suffering.

And they’re definitely coming up with creative ways to survive.

But rather than take the necessary steps to liberate the economy, the government continues to double down on more taxes and more regulation… and then invest their remaining energy to develop new tools to spy on their citizens.

Two key points here:

1) Nearly ALL bankrupt governments invariably resort to this tactic at some point.

2) It’s also a great way to engineer a banking crisis.

Think about it– Italy’s banks are already teetering on collapse. Some have already failed, others are almost there.

If Italians know that the government is spying on every transaction they make (or don’t make), who in his/her right mind would want to keep money in an Italian bank?

Anyone with half a brain will be moving funds to Switzerland or Austria.

Italy’s banks are so fragile, though, that they won’t be able to survive if even a small percentage of their depositors flee.

So as the Italian government rolls out this new tool in the latest campaign of its tax jihad, they’re all but guaranteeing widespread bank failure.

It’s genius.

To continue learning how to legitimately reduce your taxes, I encourage you to download our free Perfect Plan B Guide.

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Bank Of England Governor Claims Bitcoin Has “Failed” As A Currency

Bank of England (BoE) Governor Mark Carney declared that Bitcoin cannot be considered a legitimate currency by “traditional” definitions, The Telegraph reported Monday, Feb. 19.

At an event at London’s Regent’s University, CoinTelegraph reports that Carney claimed that Bitcoin failed to meet two major requirements of a traditional currency, claiming that Bitcoin is neither a means of exchange, nor a store of value.

“It [cryptocurrency] has pretty much failed thus far on… the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange,” Carney told students of London’s Regent’s University.

However, Carney allowed that cryptocurrency’s underlying Blockchain technology  “may still prove useful” due to its decentralised nature:

“Cryptocurrency’s underlying technology may still prove useful as a way to verify financial transactions in a decentralised way,” Carney said.

The argument that cryptocurrencies are not ideal for use as a medium of exchange is  usually made in regards to Bitcoin in particular. On Jan. 24, 2018  major payment processor Stripe stopped support  for Bitcoin because of high fees and slow confirmation times. Earlier on Dec. 7, 2017 gaming platform Steam stopped accepting Bitcoin payments, citing transaction fees of up to $20 and high volatility.

The US Internal Revenue Service (IRS), however, defines virtual currency as a “digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value” and has been taxing cryptocurrency as property since March 2014.

*  *  *

One quick question for Mr. Carney – which one of these two ‘currencies’ looks more like a store of value? Which one of these two currencies is “all over the map?”

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History Lessons From Years Under Islamism

Authored by Majid Rafizadeh via The Gatestone Institute,

In Iran, my generation, the first after Islamism came to power, is called the Burnt Generation (Persian: Nasl-e Sukhteh). Our generation earned this name for having to endure the brutality of the Islamist and theocratic regime from the time we were born, to adulthood.

This brutality included the regime’s merciless efforts, such as mass executions, to establish its power, impose its barbaric and restrictive rules, and brainwash children and indoctrinate the younger generation with its extremist ideology through various methods including elementary schools, universities, state-controlled media outlets, imams and local mosques, and promoting chants such as “Death to America” and “Death to Israel”.

Women and men were segregated. Teenagers were prevented from performing daily activities considered harmless by most of the world. Any kind of enjoyable social activities were barred, including listening to music, dancing, drinking, dating, women participating in a chess championship unless you were wearing a hijab or attending a football match or other sporting event if men were playing in it. If it made you smile, if it gave you hope, it was probably against the law, such as what could be worn, whom you were allowed to talk to, what you could listen to, and whether or not you pray or fast during Ramadan. Even the most personal and private issues became the business of the regime’s forces.

The main purpose of these restrictions and the intense control of the people, especially youths, was for the regime to expand its Islamist agenda domestically and abroad. These laws were enforced with cruel and violent punishments such as public flogging along with the threat of even more dire consequences, including stoning, public hanging and amputations. My generation was raised in an atmosphere of terror. While the rest of the world became more modern and developed, we were left to grapple with following Islamist laws and restrictions that were impossible to obey.

My generation in Iran should be seen as a lesson for the West. Almost every state (and non-state actors) underestimated the power that these Islamists could wield. Warning signs were overlooked. No one believed that such a massive change could occur and be enforced. Many underestimated the crimes that these Islamists were willing to commit to maintain their power once they came into control. To this day, they continue to prove that there are no limits to the cruelty and lack of humanity that they will engage in, such as conducting mass executions, executing children and pregnant women, stoning, amputations, public hanging, flogging, torture, and rape just to maintain this power.

Jahangir Razmi’s Pulitzer Prize-winning photograph of the execution of Kurdish men and others by the Iranian Islamic regime in 1979.

 

Many underestimated the smooth-talking strategy that these Islamists were using for decades to seize power. The radical group of Ayatollah Khomeini deceived many Iranians and the international community into believing that they were peaceful and divine people. Once they had power, the truth was revealed; by then it was too late to prevent the abuse that unfolded.

My father’s generation in Iran lived in an environment in which the Islamist party of the country’s clergy cunningly depicted themselves as intending no harm, supportive of the people, and not interested in power. So, before the revolution, many Iranians did not think that Khomeini’s party would be committing the atrocities that they are committing now or that they would have such an unrelenting hunger for power.

Instead, the country thought it was on a smooth path towards democracy, with no expectation of returning to a barbaric era. Even then-US President Jimmy Carter viewed Khomeini as a good religious holy man. According to recently declassified documents, the Carter administration even paved the way for Khomeini to return to Iran. Many internationally known scholars such as Michelle Foucault thought highly of the Islamic revolution. Foucault’s enthusiasm can be seen in his articles in European newspapers, written right before and after the revolution.

They portrayed themselves as leaders of the people, as spiritual and peaceful. However, once the Islamists rose to the top, all hell broke loose. As soon as they had a stranglehold on the country, they shifted gears to become one of the most ruthless regimes in history. Once in power, their true face was revealed; at that point, there was no way to turn back.

Thousands upon thousands of people were executed simply for voicing their opinion. Many also died for crimes they likely did not commit. The Islamic law (sharia) of the ruling Shiite party was imposed on everyone. Women were forced to wear a hijab and were stripped of their rights. They could no longer leave the country without the permission of their husbands. A women could not work in any occupation if her husband did not agree to it. Women’s testimony in court, under sharia, is worth half a man’s testimony. Women are banned from pursuing certain educational fields or occupations, such as being judges. Women are prohibited from entering sports stadiums or watching men’s sports. Women are entitled to receive half as much inheritance as their brothers or other male relatives.

Many were shocked that this political party, which spoke about the religion of peace, would do such things. Iranians, however, did not just submit to these new laws; they rose up in protest. This uprising was met with torture, rape, and death. With the regime eager to wipe out anyone who dared to resist, the people had no choice but to surrender. Everyone’s daily activities were now under the scrutiny of the Islamists.

In a four month period, some 30,000 political prisoners were hanged simply for suspected loyalties to anti-theocratic resistance groups, mainly the PMOI — incidents largely ignored by media outlets.

These are only few examples of the Islamists’ atrocities that took hold of a once thriving and modernizing country. Information about their crimes against humanity would fill several books. As bad as you may think all this is, you must understand that the reality is far, far worse. The Islamist Republic of Iran, according to Human Rights Watch, became the world leader in executing children. The legal age for girls to marry was reduced to 9. Women needed the approval of their parents to marry, and girls could not object to their guardian’s decision in marrying them off.

It may be hard to believe that such a murderous force could come into power so easily and fast. What is important to understand is that the Islamists and their followers work covertly in a society for decades to deceive the people and reach the top. Iran’s was a meticulously planned takeover that no one saw coming. The Islamists’ willingness to be patient to complete their control of the society cannot be underestimated.

Despite openly reading about all this, many will still think it is impossible for something like this to happen in their country. What they fail to understand is that Iran is an example of exactly how successful this meticulous grab for power can be.

Seeing these shrewd and calculating strategies, Islamists in other countries including the West are pursuing the same techniques on the path to seizing power. It is a quiet, subtle process, until the moment you wake up with no rights, a culture of fear, and no promise that you will live in freedom or even to see the next day.

Now, those Islamists, whom almost everyone made light of, have not only been in power for almost four decades; they have expanded their expansionist ideology to other nations and taken first prize as being the world’s leading state sponsor of terrorism and among its leading executioners.

This is a history lesson that Western and non-Islamist countries cannot afford to ignore. It is not just about history; it is about what can happen at any moment, in any country. It is about what is happening right now, beneath our noses — in East Asia, Canada, South America and Europe. The only defense is to recognize it and confront it at its roots, before it has the opportunity to woo your politicians. Once they worry more about their popularity with voters than about the future of the country you are electing them to run, you are done. Once there is control of the ballot box, there will be more and more control over every aspect of your life, destroying any future you had planned and leaving the country you once had loved in ruins.

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