Category: zerohedge

It seems getting an 8 pm “escape” from friends and family this Thanksgiving to rush into the nearby World Wrestling Federation Walmart may have been a welcome reprieve for some. Those some in question being NSA agents, and just in case their friends and family got a little too pesky, boisterous or simply inquisitive, all the employees of the National Security Agency and the Central Security Services received a prepared memo with preauthorized talking points designed to “guide” conversations over the Thanksgiving dinner table. Plastered at the head of the 2-page propaganda is a Douglas Adams-like (or was that Isaac Asimov) in its simplicity bullet point: “(1) NSA’s mission is of great value to the Nation.” How was it that “defenders” of the fatherland during the Third Reich were being brainwashed again? But we digress.

Some of the other brainwashing encouraged talking points: “(2) NSA performs its mission the right way—lawful, compliant and in a way that protects civil liberties and privacy; (3) NSA performs its mission exceptionally well. We strive to be the best that we can be, because that’s what America requires as part of its defense in a dangerous world; (4) The people who work for NSA are loyal Americans with expert skills who make sacrifices to help protect the freedoms we all cherish; (5) NSA is committed to increased transparency, public dialog and faithful implementation of any changes required by our overseers.”

There are numerous sub-bullet point to each of these humorous propaganda headers, however the gist is clear. Firedoglake has done some further analysis even if the commentary is largely trivial:

A Misleading Statistic on Disrupting Terrorism the NSA Won’t Stop Promoting

“NSA programs protect Americans and our Allies,” the document reads. “As an example, they have helped to understand and disrupt 54 terrorist events since 9/11: 25 in Europe, 11 in Asia and 5 in Africa. Thirteen of those had a homeland nexus.”

Deputy Director John Inglis admitted in August during a Senate hearing, when pressed by Sen. Patrick Leahy, that US bulk records phone spying had been “critical” in stopping just one terrorist plot. He clarified that the spying on phone records had only “made a contribution” to discovering the 13 plots.

Sens. Ron Wyden, Mark Udall & Martin Heinrich, who filed a brief in support of an American Civil Liberties Union (ACLU) lawsuit challenging the collection of phone records of all Americans, explained the Executive Branch has defended the program by conflating it with “other foreign intelligence authorities.” The senators highlighted the fact that the collection under Section 215 of the PATRIOT Act had played “little or no role in most of these disruptions.”

“Indeed of the original fifty-four that the government pointed to, officials have only been able to describe two that involved materially useful information obtained through the bulk call-records program,” the senators added. “Even the two supposed success stories involved information that [the senators] believe—after repeated requests to the government for evidence to the contrary—could readily have been obtained without a database of all Americans’ call records.”

At this point, any intelligence agency leader, member of Congress or government official who highlights 54 “thwarted” plots is advancing propaganda to save the NSA from being forced into giving up this power to collect the phone records of all Americans.

FISA Court Opinions Show the NSA Has Not Performed Its Mission in Lawful and Compliant Manner

The claim that NSA “performs its mission” in a manner that is “lawful, compliant, and in a way that protects civil liberties and privacy” is demonstrably false.

A Foreign Intelligence Surveillance Court (FISC) judge ruled, when reviewing a program that was collecting records of Internet communications” that the agency had committed “longstanding and pervasive violations” of prior orders by the court. It found that government officials knew or had reason to know that “portions” of collection constituted “unauthorized electronic surveillance.” This unauthorized and illegal surveillance “included information concerning the identity of the parties and the existence of communications to or from persons in the United States.”

FISC Judge John Bates stated that the government had a “history of material misstatements”—otherwise known by Director for National Intelligence James Clapper as “least untruthful” answers and known among non-members of the national security state as lies. The government had a “poor track record” of exceeding the implementation constraints or going beyond purported privacy safeguards represented to the court.

Another ruling by the FISA Court in 2009 found, the NSA “frequently and systematically violated” the agency’s “minimization procedures,” intended to protect Americans’ privacy, “that it can fairly be said that this critical element of the overall [business records] regime has never functioned effectively.”

As Julian Sanchez of the CATO Institute recently recounted, “For the first three years of the call records program’s current incarnation, the FISC was misinformed about how it really worked. As a result, software tools routinely accessed the data without the required approvals: Of the 17,835 phone numbers searched by one automated alert list from 2006 to 2009, only 1,935 had been vetted for “reasonable suspicion.” Query results were also improperly shared with the CIA and FBI.”

In fact, journalist Marcy Wheeler, who has written in extensive detail on all the released NSA documents so far, has demonstrated through multiple posts that the NSA has continued an illegal wiretapping program that has grown in size since it was first exposed under President George W. Bush.

Targeting a US Person’s Porn Viewing Without Probable Cause

The agency claims the “NSA does not target US citizens or permanent resident aliens unless that targeting is premised on a finding of probable cause to believe that the person is a foreign power or the agent of a foreign power.” But journalists Glenn Greenwald, Ryan Gallagher and Ryan Grim recently published parts of a document for a story at Huffington Post that showed NSA director Gen. Keith Alexander had sought to discredit radical Muslims by spying on their porn-viewing habits. One of the six targets discussed in the document was a US person.

None of these people targeted were believed by the NSA to be involved in any terrorist plots. The NSA wanted to embarrass them because they had a history of espousing views that the agency considered dangerous to the United States. There was no “probable cause” to suggest the persons targeted with this COINTELPRO-style spying tactic had committed any criminal acts of violence.

Full propaganda below:

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/OAsi0jac3ys/story01.htm Tyler Durden

Until early May of this year, trends in US macro fundamentals and US stock markets were ‘relatively’ well correlated. However, since the first stirrings of Taper concerns, the relationship has seemingly explicitly inverted. Day after day we see markets react to “good” or “bad” news but over time, as the following chart shows, the Fed’s total farce has been exposed. Simply put, if the last 7 months of market-macro relationships hold (which makes sense in a world entirely driven by Fed liquidity), the Bulls should be praying for the economic fundamentals to collapse or things will get painful fast for stocks.

As the following chart shows – each time fundamentals have ‘improved’ relative to expectations (as with this morning’s ISM), stocks have begun to lose altitude. The current wedge between macro reality and liquidity-inspired markets has not been greater in this cycle…

 

and at the same time – Treasuries re-synced…

 

But this time, stocks have already discounted in the Fed’s balance sheet for the next few months…

So, conversely, equity market bears are implicitly supporting a recovering economic fundamentals thesis and thus that idiocy explains why there are none left…

 

Oneonly has to look at the labor force to know things are never going back to the old normal and “blind faith” that fundamentals will recover enough to support the forward valuations that stocks have defies business cycle (and credit cycle) logic from here.

 

Charts: Bloomberg and @Not_Jim_Cramer

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The two bullet points below from a just released update by Yum Brands explain all you need to know about the “magic” of half-off retail discounts.

• YUM BRANDS- IN CHINA, LIMITED-TIME “HALF PRICED” BUCKET PROMOTION YIELDED AN ABOUT 16% INCREASE IN KFC SAME-STORE SALES FOR FIRST 10 DAYS OF NOVEMBER
• YUM BRANDS – IN CHINA, KFC SAME-STORE SALES WERE DOWN APPROXIMATELY 8% FOR THE REMAINDER OF NOVEMBER

So, sales were up 16% for the 10 days in which margins were crushed, then down 8% for the remaining 20 days. And the net impact on the bottom line is…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AA818SLPL1s/story01.htm Tyler Durden

The two bullet points below from a just released update by Yum Brands explain all you need to know about the “magic” of half-off retail discounts.

• YUM BRANDS- IN CHINA, LIMITED-TIME “HALF PRICED” BUCKET PROMOTION YIELDED AN ABOUT 16% INCREASE IN KFC SAME-STORE SALES FOR FIRST 10 DAYS OF NOVEMBER
• YUM BRANDS – IN CHINA, KFC SAME-STORE SALES WERE DOWN APPROXIMATELY 8% FOR THE REMAINDER OF NOVEMBER

So, sales were up 16% for the 10 days in which margins were crushed, then down 8% for the remaining 20 days. And the net impact on the bottom line is…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AA818SLPL1s/story01.htm Tyler Durden

Submitted by Gregory Cummings via The Ludwig von Mises Institute of Canada,

Last week, I heard about a particularly tragic example of the post hoc, ergo propter hoc logical fallacy, which Frederic Bastiat, the great 19th-century economist, called “the greatest and most common fallacy in reasoning.”

After the outbreak of World War II, many isolated islands located in the Pacific Ocean became staging grounds for Japanese and Allied forces. This development unfolded before the primitive indigenous peoples, including those on the island of Tanna, Vanuatu. According to Wikipedia:

The vast amounts of military equipment and supplies that both sides air-dropped (or airlifted to airstrips) to troops on these islands meant drastic changes to the lifestyle of the islanders, many of whom had never seen outsiders before. Manufactured clothing, medicine, canned food, tents, weapons and other goods arrived in vast quantities for the soldiers, who often shared some of it with the islanders who were their guides and hosts.

Sadly, this arrangement came to an abrupt end with the end of the war, when the Allied forces abandoned these temporary airbases. Once again, the islanders no longer had access to the myriad of consumer goods provided by visitors from distant advanced economies.

As a result, on Tanna island and elsewhere, local inhabitants formed so-called “cargo cults” in order to restore their lost prosperity:

In an effort to get cargo to fall by parachute or land in planes or ships again, islanders imitated the same practices they had seen the soldiers, sailors, and airmen use. Cult behaviours usually involved mimicking the day to day activities and dress styles of US soldiers, such as performing parade ground drills with wooden or salvaged rifles. The islanders carved headphones from wood and wore them while sitting in fabricated control towers. They waved the landing signals while standing on the runways. They lit signal fires and torches to light up runways and lighthouses.

 

In a form of sympathetic magic, many built life-size replicas of aeroplanes out of straw and cut new military-style landing strips out of the jungle, hoping to attract more aeroplanes.

The indigenous peoples of Tanna island observed that material goods arrived after the presence of landing strips and aeroplanes. This led them to falsely conclude that material goods arrived because of the presence of landing strips and aeroplanes. They failed to consider other causal factors, such as the war, and based their conclusion solely on the order of events. This is the essence of the post hoc ergo propter hoc logical fallacy.

This error in reasoning persists today, particularly in the realm of economics as it relates to the role of government. For example, relative to a hundred years ago, it is obvious that our standard of living has drastically improved. P.J. O’Rourke illustrated this brilliantly by observing, “When you think of the good old days, think one word: dentistry.” Quite simply, we owe this increased prosperity to staggering improvements in marginal productivity and the division of labour brought about by capital accumulation and savings in a society based on voluntary exchange and a price system resulting from the ownership of justly-acquired private property. There is no other path to prosperity.

In spite of this knowledge, there remain numerous court intellectuals and their acolytes who serve as apologists for government, falsely insisting that since we are more prosperous after such and such regulation or such and such measure of taxation (other factors not being equal), we are more prosperous because of such and such regulation or such and such measure of taxation. Therefore, they conclude, more and more economic intervention is needed to cure our accumulating economic woes. And so it is, that the post hoc ergo propter hoc fallacy reasserts itself.

But insofar as our well-being is concerned, government intervention in the economy is no more effective than the straw aeroplanes and wooden headphones of some bewildered “cargo cult.” In truth, it probably does more harm.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/B8HRwVBhWk4/story01.htm Tyler Durden

Authored by Anthony Peters of SwissInvest, via IFR,

Risk is a four-letter word

The markets seem to think we live in a largely riskless world.

RISK IS A funny old thing at the best of times, and even funnier when it is supposed to be correctly priced.

Most of us grew up with the understanding that the correct price for credit – my main area of expertise – was a function of the default probability, adjusted for the expected recovery rate.

Perhaps the simplest and cleanest example of risk pricing is to be found in the credit card industry, where your “bucketing” is of paramount importance. The lower your perceived risk is, the better a risk bucket you get lumped into and the lower your interest rate is. That’s banking 101, but it still isn’t clear to everyone that the net earnings from each bucket are expected to be similar, based on higher spreads being matched to higher defaults. Excess returns are generated when the expected defaults do not occur at the forecast rate.

So far, so good. But then how does one extrapolate that basic rule of lending to the way credit markets have been performing of late?

My old chum Suki Mann, living legend and credit strategist at Societe Generale here in London, highlighted the point – albeit probably not intentionally – in a piece he wrote this week. He asked, rhetorically, whether it would be possible for the credit markets to repeat this year’s performance in 2014 – wondering, in other words, whether a further 8.4% of returns on 220bp of spread tightening in high-yield or 2.4% returns with 22bp of spread tightening in investment-grade were possible.

“We’d concur with the former,” he wrote, “but up to 7% is not impossible off 100bp of spread tightening; while in IG, we think 2%-plus is possible with tightening in [iBoxx] index spreads of around 30bp.”

Although I don’t entirely disagree with Suki, I can’t detect too much science going into his pricing model, if that is what it is. The sole point of reference seems to be the all-time low spread of the iTraxx Main index, which was registered at 20bp in June 2007. As recently as early October it was trading at 100bp but is now marking around 75bp. Hence, his rather confident assertion that a further 20bp of tightening should not be a problem.

PERHAPS, BUT ONLY because the first rule of investing now appears to have become: if the worst is about to occur, then the monetary authorities will make sure that it doesn’t.

Let’s face it, Saint Mario Draghi did not only say that he will do “whatever it takes”, the bit of his assertion everyone remembers, but also, and perhaps more importantly, “…and believe me, it will be enough”.

In doing so, he removed huge swathes of what we once called risk – a concept that used to be known as a four-letter word. This raises the question: are risk assets now riskless assets or are they risk assets disguised as riskless?

What goes for bonds appears to go for equities too, even though we did experience something of a wobble in the summer when the US Fed seemed set to taper its bond buying programme. Since then, though, the Fed, in its own inimitable way, appears to have let equity markets believe that it will do nothing that might hurt share prices and hence shareholders. If anything, the velocity of the rally now appears to be increasing rather than decreasing.

Either the Fed is deceiving markets into believing that there is nothing to fear, or it is not making itself clear enough. To be frank, I doubt it is the latter.

SO WHAT HAS become of risk pricing? Well, one might try to argue that if there is no risk, then there can be no price for it. But that would be perhaps taking it a little bit too far – even for me.

Nevertheless, pricing risk has become so alien that even non-monetary policy-related risks are being disregarded. The little tiff between China and Japan (and by proxy the Americans) over a group of uninhabited islands never even caused a ripple in financial markets. And although it was written that oil prices had fallen in the aftermath of the interim agreement between Iran and the West, if one looks at the charts, WTI was trading well below its 300-day moving average long before the news broke – and the Geneva breakthrough doesn’t appear to have even registered.

Is there no risk or has the way in which authorities prevented the fallout from the credit bubble and the events that led to its formation led a generation of traders and investors to believe that it is a thing of the past?

One hedge fund manager once proudly stated that life is a bull market intersected by corrections. In the midst of the credit crisis I laughed at him.

Looking at the state of the world now, he might be laughing back, having concluded that the 2007 financial crisis and the 2008 fall of the House of Lehman were nothing more than bigger corrections and hence thumping buying opportunities that could only have been missed by idiots.

I guess that puts me in my place. Either that or there is something lurking out there that we have forgotten how to identify – and hence how to value.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/xlrbeJKU6IE/story01.htm Tyler Durden

In Bernanke’s centrally-planned, inverse Robin Hood world, record stock prices for the few unfortunately mean record homelessness for the many: this is what the state of Massachusettes found out the hard way after it was flooded with a record number of homeless families who are overwhelming the state’s emergency shelter system.

As the Boston Globe reports, citing a recent report from the Department of Housing and Urban Development, the number of homeless people in shelters and living on the streets in Massachusetts has risen 14 percent since 2010 to a record 20,000 in January 2013, even as homelessness has declined nationally.

Aaron Gornstein, the undersecretary for housing, said the surge has followed cuts in state and federal housing subsidies, soaring rents in Greater Boston, and still-high rates of unemployment and underemployment, particularly among lower-income workers.

 

“The state as a whole has recovered from the Great Recession faster than most other states, but in many ways we’re still struggling,” Gornstein said. “Federal budget cuts have made the situation worse.”

However, in what may be the most curious twist, and yet another example of how perverted the incentive and capital allocation system in the US is, the nearly 2,100 families who could not find place in shelters, were housed in motel rooms at a greater cost to all US taxpayers amounting to tens of millions.

An average of nearly 2,100 families a night — an all-time high — were temporarily housed in motel rooms in October, just about equaling the number of families in emergency shelters across the state, according to be the state Executive Office of Housing and Economic Development.

 

The demand for shelter is so great that the state has been temporarily sending homeless families from Boston to motels in Western Massachusetts, although state officials said many have been relocated back again, closer to home.

The rest of the story is largely well-known. “This jump in homelessness is another example of an uneven recovery. Even as stocks soar to new heights and real estate values rebound, many of the state’s poorest residents remain without jobs and homes four years after the last recession. The problems have been compounded by the dramatic federal spending cuts, known as sequestration, which have cut housing and food subsidies.”

“There’s no question, this is a continuing legacy of the Great Recession,” said Michael Goodman, a professor of public policy at the University of Massachusetts Dartmouth. “There’s more we can do to help, but it’s not likely, given where federal policy is. That suggests it’s going to be a very long winter for many.”

Whatever the reason for the record class disparity (and the reason is quite clear – Ben Bernanke – whose existence has made America’s legislative branch obsolete, and with it taken away the only thing that may help America’s poor: fiscal reform), one thing is certain: as tales of the hotel-housed homeless spread, everyone and their grandmother (quite literally) will scramble to join the ranks of people without a roof and be housed, on the taxpayers’ dime, in your friendly, local and quite comfortable hotel.

In the Western Massachusetts community of Greenfield, taxicabs pull up to the Quality Inn, but instead of tourists or business travelers with wheeled luggage, homeless families toting belongings in trash bags emerge.

 

Gretchen Vazquez is one of them. She moved into a room in the Quality Inn in October with her two daughters, 1- and 9-years-old, when the state subsidy for her Roxbury apartment ran out after the Legislature stopped funding a program called HomeBASE. The program was created to provide an alternative to emergency shelters.

 

The cramped motel, Vazquez lamented, is far from her evangelical church and her daughter’s school in West Roxbury. After missing about two weeks of school, her daughter enrolled in the public school system here.

 

“I’m stuck,” said Vazquez. “I don’t know what’s going to happen next.”

 

Massachusetts has one of the most extensive shelter systems in the country. Unlike most states, it offers emergency housing to anyone who qualifies. Many end up in shelters or living in homes that board families in rooms, known as congregate housing.

In the meantime, Massachusettes (and the homeless of course) are grateful for the generosity of America’s taxpayers.

Motels are one of the state’s most expensive options at $82 a night, almost as much as congregate housing’s $100 a night cost. In the past five years, state spending on motels has exploded to more than $46 million from about $1 million in 2008, according to state records

 

The average motel stay, state housing officials said, is about seven months, although some families live in motels for a year waiting for affordable housing.

 

Libby Hayes, executive director of Homes for Families, a Boston advocacy group, said it is not surprising that low-income workers with fewer skills cannot make ends meet since even college graduates are struggling to find work.

Naturally, the people are angry:

“The economy is not working,” Hayes said. “How do we expect people from the lowest income tier to make it if people who have had opportunities can’t?”

 

The recent jump in homeless people signals that people have run out of alternatives, said Randy Albelda, an economics professor at the University of Massachusetts Boston. Many families were able to stay off the streets by living off savings, doubling up with family members, or sleeping on friends’ couches, Albelda said. But eventually their money or relatives’ good will “just runs out.”

 

“Families close to the edge have not been able to pull back from the edge in this recovery,” Albelda said. “That’s in part because the recovery has not affected the bottom 30 to 40 percent of people.”

However, something tells us that one of the proposed solutions…

Rather than warehousing families in motel rooms, said Jim Greene, director of the Emergency Shelter Commission of Boston, the state needs more long-term rental assistance programs that target families who are homeless or at risk of homelessness.

 

“That’s how you bring the numbers down, with the right social services,” he said. “Short-term programs don’t get people out of homelessness.”

… namely converting short-term help into long-term (read perpetual) state and government help, is hardly the solution either.

Then again, who really cares about the plight of a few thousand homeless families as long as America’s billionaires can tweet about a stock, and immediately become billionairish-er, in the process buying off however many politic
ians and regulators is required to keep behavior such as that legal.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3fzPEOIwS-I/story01.htm Tyler Durden

Retirement is still on for now. Late-minute desperation (in EURJPY) dragged the Dow just back over 16,000 and the S&P limped above 1,800. Bonds were sold (though less aggressively than gold and silver) and the USD rallied as early exuberance gave way to an uglier realization that good-news-is-really-bad-news after all following today's data. Volume was average as VIX continued to rise to 14.3% – its highest close since mid-October as we see the 4th session in a row with selling into the close. Today was the worst frst-day-of-month for the S&P since May.

 

EURJPY and S&P 500 joined at the hip – clearly EURJPY was the algo lever to ensure an 1,800 close…

 

4th day in a row of late-day selling pressure…

 

As VIX is rising rather notably…

 

Disconnecting further from stocks…

 

How long before the hedges are rotated into actual unwinds of this?

 

An ugly day for precious metals…as oil rallied further

 

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gUHiBseG2Jk/story01.htm Tyler Durden

Retirement is still on for now. Late-minute desperation (in EURJPY) dragged the Dow just back over 16,000 and the S&P limped above 1,800. Bonds were sold (though less aggressively than gold and silver) and the USD rallied as early exuberance gave way to an uglier realization that good-news-is-really-bad-news after all following today's data. Volume was average as VIX continued to rise to 14.3% – its highest close since mid-October as we see the 4th session in a row with selling into the close. Today was the worst frst-day-of-month for the S&P since May.

 

EURJPY and S&P 500 joined at the hip – clearly EURJPY was the algo lever to ensure an 1,800 close…

 

4th day in a row of late-day selling pressure…

 

As VIX is rising rather notably…

 

Disconnecting further from stocks…

 

How long before the hedges are rotated into actual unwinds of this?

 

An ugly day for precious metals…as oil rallied further

 

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gUHiBseG2Jk/story01.htm Tyler Durden

From the start of 2012, the S&P 500 up over 40% with the bulk of that surge coming since QE3 (and 4EVA) was unleashed. Until that point, Goldman’s global risk and macro models had stayed relatively well synced with stock market ‘reality’ but once that torrent of liquidity was released, all bets were off. As the following chart shows, more than half the equity market performance is due to factors unrelated to risk, macro fundamentals, or country-specific factors. So, BFTATH of course?

 

 

Chart: Goldman Sachs

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/rD-IQUSsuU4/story01.htm Tyler Durden