Chinese state media outlet Global Times has reported one of its journalists had been seized and bound in an ‘arrest’ by anti-Beijing Hong Kong protesters which had occupied the city’s international airport.
Global Times’ editor-in-chief Hu Xijin made an appeal on social media Tuesday for the protesters to release the reporter, saying he was only there to cover the demonstrations and must not be harmed. He also called on western journalists to intervene in the situation.
Screengrap of Fu Guohao being bound and paraded by anti-Beijing HK protesters.
Hu Xijin confirmed the identity of the man seen in the video being bound with multiple zip ties with his arms placed above his head.
The protesters surrounded the mainland-based reporter as if a high value detainee, accusing him of wrongdoing.
Fu Guohao, reporter of GT website is being seized by demonstrators at HK airport. I affirm this man being tied in this video is the reporter himself. He has no other task except for reporting. I sincerely ask the demonstrators to release him. I also ask for help of West reporters pic.twitter.com/sbFb0L3s92
The Hong Kong airport has been reportedly completely retaken by police less than an hour after reports of riot police storming the airport first hit the Internet. Few injuries have been reported – but many have been arrested. The Guardian reports that the police arrested more than 20 protesters.
The major Chinese daily editor wrote:
Fu Guohao, reporter of GT website is being seized by demonstrators at HK airport. I affirm this man being tied in this video is the reporter himself. He has no other task except for reporting. I sincerely ask the demonstrators to release him. I also ask for help of West reporters.
CNN described the circumstances of the journalist’s detention as follows:
Hong Kong TV channel iCable, a CNN affiliate, reported that the man was wearing a yellow high visibility vest and that protesters were demanding to see his press ID, while shouting “gangster” at him.
According to local reports, protesters pinned him to the ground, seized his belongings and draped an “I love HK Police” T-shirt over him, as others tried to step in and stop the violence.
Though this man was eventually evacuated and treated by paramedics, Global Times insisted the man was simply reporting on the riots when he was captured and brutalized.
via ZeroHedge News https://ift.tt/2Tr66L2 Tyler Durden
It’s been just over a year since Elon Musk’s infamous ‘funding secured’ tweet, and everybody who followed the New York Times’ relentless coverage of the scandal – the paper helped expose the fact that Musk effectively lied to the public and violated a bevy of SEC rules – will remember that legendary NYT business columnist Jim Stewart not only led the paper’s coverage, but also scored an interview with Musk where the CEO shared how stressed out and depressed he had become over the company’s production difficulties with the Model 3.
But, as it turns out, during the course of his research, Stewart, who, in addition to his role at the NYT, is a regular contributor of CNBC, was invited by Jeffrey Epstein to visit his Manhattan townhouse for an ‘on background’ interview.
The meeting with Epstein happened a few months before the Miami Herald published its series of exposes that led to the latest round of charges against Epstein.
Epstein’s townhouse
In a story published in the NYT on Tuesday, Stewart recounted the details of their meeting (it was supposed to be on background, but since Epstein is now deceased, Stewart believes he can now violate that agreement).
Most surprisingly, Stewart described Epstein’s affect as almost incredulously carefree. While Stewart wasn’t able to glean much information about Musk or Tesla from Epstein (perhaps because, he discerned, Epstein actually knew far less than he was letting on), he listened as Epstein showed off photographs with famous friends (including MbS and…you guessed it…Bill Clinton) and held forth about a range of stunning a lascivious subjects.
Here’s a rundown of some of Epstein’s most suspicious comments.
Epstein openly professed his love of underage women, and even implied that sex between older men and teenage girls should be legal.
If he was reticent about Tesla, he was more at ease discussing his interest in young women. He said that criminalizing sex with teenage girls was a cultural aberration and that at times in history it was perfectly acceptable. He pointed out that homosexuality had long been considered a crime and was still punishable by death in some parts of the world.
Many prominent Silicon Valley figures have a reputation for being workaholics, but they’re actually “hedonistic” drug users who tasked Epstein with arranging sexual encounters (and we can infer what that means).
Mr. Epstein then meandered into a discussion of other prominent names in technology circles. He said people in Silicon Valley had a reputation for being geeky workaholics, but that was far from the truth: They were hedonistic and regular users of recreational drugs. He said he’d witnessed prominent tech figures taking drugs and arranging for sex (Mr. Epstein stressed that he never drank or used drugs of any kind).
Epstein showed off a photo of him with MBS. This was well before the murder of Jamal Khashoggi.
Before we left the room he took me to a wall covered with framed photographs. He pointed to a full-length shot of a man in traditional Arab dress. “That’s M.B.S.,” he said, referring to Mohammed bin Salman, the crown prince of Saudi Arabia. The crown prince had visited him many times, and they spoke often, Mr. Epstein said.
During their conversation, Epstein frequently took breaks to attend to his ‘currency trading’ (we’d be curious to learn which discount brokerage he preferred).
He led me to a large room at the rear of the house. There was an expansive table with about 20 chairs. Mr. Epstein took a seat at the head, and I sat to his left. He had a computer, a small blackboard and a phone to his right. He said he was doing some foreign-currency trading.
Epstein bragged about how his reputation didn’t stop people from attending his parties. He even considered becoming a minister to help himself appear more trustworthy.
He said this was something he’d become used to, even though it didn’t stop people from visiting him, coming to his dinner parties or asking him for money. (That was why, Mr. Epstein told me without any trace of irony, he was considering becoming a minister so that his acquaintances would be confident that their conversations would be kept confidential.)
A few months after their conversation, Epstein asked Stewart if the NYT business writer would be interested in writing his biography (presumably for a hefty fee).
Several months passed. Then early this year Mr. Epstein called to ask if I’d be interested in writing his biography. He sounded almost plaintive. I sensed that what he really wanted was companionship. As his biographer, I’d have no choice but to spend hours listening to his saga. Already leery of any further ties to him, I was relieved I could say that I was already busy with another book.
Stewart passed, but, looking back….
That was the last I heard from him. After his arrest and suicide, I’m left to wonder: What might he have told me?
via ZeroHedge News https://ift.tt/2ZUQJwZ Tyler Durden
When something like the truly freakish chart below appears, you’d think that even the Wall Street gamblers would get their collective heads out of the sand.
The fact that in September 2017 Austria was able to issue a 100-year bond at a mere 2.1% yield was crazy enough. After all, the old Austria (Austro-Hungarian Empire) disappeared exactly 100 years ago at the Versailles Conference; the rump state left behind was nearly crushed by Hitler in the 1930s and the Soviet Union in the 1950’s; and for the last 70-years inflation has averaged 2% at least, while the welfare state keeps growing and taxes keep rising.
So why so-called “investors” purchased a 100-year bond with the prospect of virtually no yield after inflation and taxes and a reasonable doubt as to whether the Austrian state would survive to 2117 was always a bit of a mystery.
But it could perhaps be explained by the Greater Fool theory. That is, there wasn’t much yield to be had anywhere else in Europe, and a smart asset manager could always collect the 2.1% yield and get out of Dodge at the first sign of credit weakening, rising inflation or default troubles by dumping this dubious paper on the next in-rotation mullets.
That was then, and as they say on late night TV, there’s more. Much more!
In the the interim, the price of this EUR 3.5 billion beauty soared by 60% from the issue price, forcing the already meager yield down to just 1.12%by late June. So, not surprisingly, the Austrian government didn’t need any special prompting: It reopened the issue and sold another EUR 1.25 billion tranche due 2117 for a yield barely above 1.0%.
Even then, the madness was just getting up a head of steam. As the amount of subzero debt in the world soared from $10 trillion to $15 trillion during the last 60 days, the price of the Austrian bond climbed sharply to nearly 186% of par,meaning that the current yield is now well below 1.00%, but more importantly, the bonfires of speculator stupidity are now sure to ignite.
That is to say, if the nation of Austria and the solvency of its government manage to survive until 2117, the current holders and all their heirs and assigns and next in rotation mullets are guaranteed to collectively loose the entire 86% premium embodied in today’s price—-since even a solvent Austria would only redeem the bond at par. Of course, that guaranteed principal loss would wipe out approximately the next 40 years worth of interest—-even if you don’t care about inflation, taxes and the present value of payments 100-years out in the bye-and-bye.
But here’s the more incendiary point. The bond’s price is now going parabolic, as is evident in the right-hand side of the chart. That’s because there is massive convexity in ultra long-dated paper, meaning that just a few basis points of yield change will cause a very large change in price.
For instance, if the central banks of the world manage to drive average global yields another 50 basis points lower by next August, the bond’s price will rise to about 244%. And just easy peasy, a speculator who bought the original issue in September 2017 would have booked a 150% profit (including interest). On a bond!
Moreover, if he funded the purchase on margin or repo, the gain would be orders of magnitude higher.
That’s why they are buying this junk. It’s a price-chasing speculative mania that has gone absolutely bonkers in all of the fixed income markets of the world, of which the Austria 100-year bond is only the leading edge.
And that gets to the topic at hand. Keynesian central bankers and their Wall Street apologists want you to believe that subzero debt isn’t crazy at all, and certainly not a consequence of their own massive bond buying.
Instead, they have invented absolute tommyrot to explain the otherwise inexplicable. To wit, the bogus claim that the world is suffering from a massive “savings glut” and that subzero yields are simply Mr. Market at work clearing that decks of supply and demand.
Likewise, Mr. Market is also supposedly discounting a very weak recessionary global economy ahead, thereby driving down yields in anticipation of faltering demand for borrowed money and sinking inflation rates.
In other words, this race to the yield bottom is supposedly rational—-the pricing out of totally new conditions that have emerged in the global economy and fixed income markets.
Well, if you want to contemplate “rational”, just consider this. Were global interest rates to rise just1.0% on average—-back to where they were less than a year ago—the Austria bond sitting up there in the nosebleed section of financial history at 185.75would plunge to just 115 for nearly a 40% wipeout!
Needless to say, that would happen not decades from now, but next year; and not after an unprecedented financial conflagration, but just with a return to interest rates that prevailed well less than one year back.
That’s right. The 10-year UST closed at a 1.65% yield today, but as recently as February 11 it had yielded 2.65%.
Likewise, the German 10-year bund closed at negative 0.59%—crazy enough itself—but was one percent higher at +0.41% in October 2018. And same story goes with the British 10-year gilt which has moved from a 1.49% yield last October to just 0.49% today.
Needless to say, the 100-year Austrian bond is not some kind of one-of-a-kind freakish side show in the far back of the financial circus. As the grid below shows, there are now trillions of long-dated bonds that are trading at subzero yields, and which will positively crash in price when the current bond mania ends.
This has happened very rapidly. As recently as early 2015, there was less than $2 trillion of investment grade bonds trading at subzero yields, and by late 2017/early 2018 the figure was still generally less than $8 trillion.
But in recent months, it has gone parabolic, and that fact alone demolishes the Wall Street rationalizations. That is, there is no “savings glut” to begin with—-but even the modest savings rates now evident among the major world economies have changed very little since 2015 and hardly at all during the past year of soaring subzero yielders on the global market.
So the savings rate cannot even begin to explain the chart below.
In any event, here is the culprit. During the 15 year period between 2003 and 2018, there was indeed a “glut”, but it was one of central bank bond-buying, not honest-to-goodness real money savings out of current production and income.
In fact, the central banks collectively jammed their big fat thumbs on the scale of global supply and demand for savings and borrowings to the tune of $22 trillion. That is, $22 trillion of “demand” for government bonds and other securities that was funded by digital credits issued to the selling bond dealers that had been snatched from thin monetary air.
Not only has that saturated the markets with trillions of excess liquidity than can slosh into bond-buying in an instant in response to a risk-off headline, but more importantly, it has taught speculators a powerful lesion: Namely, to buy what central banks are buying or signaling the will be soon buying because that is literally the greatest front-running opportunity in recorded history.
And that’s why bond prices have gone parabolic in recent weeks and months, and why the mountain of subzero debt on global markets have been soaring by upwards of a trillion dollars in one or two days.
Just review the Austrian 100-year bond chart above because in slightly exaggerated form it demonstrates the powerful trading windfalls that result from central banks driving down interest rates in their futile attempts to stimulate sustainable growth, incomes and jobs. To wit, its cause longer-duration bond prices to soar, and turns fixed income investing on its head.
Instead of a venue for long-horizon investors to find safety and modest yield, the central banks have turned the bond pits into gambling forums where yields are irrelevant and short-term capital appreciation is the name of the game.
Except. Except. If you insist on buying Beyond Meat Inc at 125X sales or even a high flyer like Chipotle at 56X earnings, you can dream that much of the known world will soon become Vegan or go bonkers for an over-priced Burrito Bowl, but not so with these high-flying premium bonds.
Everywhere and always bonds will return to par at redemption, and collectively the traders and speculators who today are pleased to call themselves investors are going to loose their shirts.
That much is guaranteed. The only thing at issue is how soon the bloodbath comes, and how violently the financial terror spreads from the bond markets to the rest of the financial system
Combined Global Central Bank Balance Sheets—-Shrinkage For First Time In Modern History
As to the savings glut, that is simply risible nonsense. The chart below tells you all you need to know because it displays the US net savings rate in the most accurate manner possible. That is, it combines household savings plus corporate savings (i.e. retained earnings) plus government sector dis-savings, and compares that sum to national income.
That’s the most robust measure of “savings” because it represents the net sum left from current period income that can be used for investment, and it has been heading south for many decades.
At the current 2.1% level, it stands at a mere fraction of the 8-10% of national income level which prevailed during the heyday of American prosperity during the 1960s and later.
Nor is it the case, that US national savings have nearly vanished, but no matter because there is an even greater surplus in the rest of the world. But that’s blatant hogwash, too.
Take the case of Europe, where the entire yield curve of countries like Germany and Netherlands is trading at subzero levels, and in even the socialist dystopia of France yields up to 15-years are negative and even its 50-year debt trades at only 0.81%.
Self-evidently, the ECB manic bond-buying, which now amounts to $3 trillion just since 2015 and according to Draghi is fixing to restart after finally pausing only in December, has basically crushed investment grade yields in the Eurozone. There is actually more than a dozen junk bonds trading at subzero, as well.
Yet Mario Draghi recently had the gall to insist that ultra loose monetary policy and NIRP are,
……… “not the problem, but a symptom of an underlying problem” caused by a “global excess of savings” and a lack of appetite for investment……This excess — dubbed as the “global savings glut” by Ben Bernanke, former US Federal Reserve chairman — lay behind a historical decline in interest rates in recent decades, the ECB president said.
Nor did Draghi even bother to blame it soley on the allegedly savings-obsessed Chinese girls working for 12 hours per day in the Foxcon factories assembling iPhones. Said Europe’s mad money printer, Europe also has the disease and when it comes to the savings glut,
The single currency area was “also a protagonist…….”
Actually, that’s a bald faced lie. The household savings rate in the eurozone has been declining ever since the inception of the single currency. And that long-term erosion has continued on a downward trend line ever since Draghi issued his “whatever it takes” ukase in August 2012.
To be sure, double-talking central bankers like Draghi slip in some statistical subterfuge, claiming “current account surpluses” are the same thing as “national savings”.
Actually, they are nothing of the kind; current account surpluses and deficits are an accounting identity within the world’s Keynesian GDP accounting schemes, and for all nations combined they perforce add to zero save for statistical discrepancies.
In fact, current account surpluses and deficits are a function of central bank credit and FX policies and their impact on domestic wages, prices and costs. Chronic current account surpluses result from pegging exchange rates below economic levels and thereby repressing domestic wages and prices, and chronic deficits from the opposite.
Stated differently, what central bankers claim to be “excess savings” generated by households and businesses, which need to be punished for their sins, are actually deformations of world trade and capital flows that are rooted in the machination of central bankers themselves.
That much is evident in Draghi’s own numbers. He chides Germany and the eurozone for fueling the savings glut as represented by 5% and 3% of GDP current account surpluses, respectively. But that’s a case of the pot calling the kettle black, if there ever was one.
During the 14 years before Draghi’s mid-2012 “whatever it takes” ukase, which meant that he was fixing to trash the then prevailing exchange rate of 1.30-1.40 dollars per euro, the eurozone did not have a current account surplus. The surplus has only emerged beggar-thy-neighbor style since Draghi trashed the currency.
What Draghi cites as the problem—a current account surplus—that he is fixing is mainly his own creation!
That is, it is a result of the 20% currency depreciation the ECB effected under his leadership, and also the temporary improvement in Europe’s terms of trade owing to the global oil and commodities glut. And even in the latter case it is central banker action that originally led to the cheap credit boom of the last two decades and resulting worldwide over-investment in energy, mining, manufacturing and transportation capacity.
In any event, the eurozone surpluses since 2011 shown below do not represent consumers and business failing to spend enough and hoarding their cash. To the contrary, these accounting surpluses are just another phase of the world’s massively deformed system of global trade and capital flows. The latter, in turn, is the fruit of a rotten regime of central bank falsification of money and capital markets.
In fact, when savings are honestly measured, there is not a single major DM economy in the world that has not experienced a severe decline in its savings rate over the last several decades. The Canadian household savings rate, for example, has literally dropped rate off the charts, and now stands at just 1.1%.
Likewise, Japan’s much vaunted high saving households back in its pre-1990 boom times have literally disappeared from the face of the earth. Yet this baleful development occurred just when Japan needed to be building a considerable savings nest egg for the decades ahead when it will essentially morph into a giant retirement colony.
The deep secular decline of household savings rates throughout the DM world is in itself the tip-off that central banks have drastically deformed the financial system, and are now telling the proverbial Big Lie about a phony “savings glut” in order to justify their continued savage assault on depositors. That’s because under any historical rule of sound money, the kind of investment boom experienced by the EM world during the last two decades would have been accompanied by the upsurge of a large savings surplus in the DM economies.
During the great global growth and industrialization boom between 1870 and 1914, for example, Great Britain, France, Holland and, to a lesser degree, Germany were huge exporters of capital. By contrast, the emerging markets of the day——the United States, Argentina, Russia, India, Australia etc.——-were major capital importers.
That made tremendous economic sense. The advanced economies of the day earned trade surpluses exporting machinery, rolling stock, steel and chemicals and consumer manufactures, and then reinvested these surpluses in loans and investments in ships, mines, railroads, factories, ports and public infrastructure in the developing economies.
The lynch-pin of this virtuous circle, of course, was common global money. That is, currencies that had a constant weight in gold, and which, accordingly, were convertible at fixed rates over long stretches of time. English investors and insurance companies, for example, invested in sterling denominated bonds issued by foreign borrowers because they knew the bonds were good as gold, and that their only real risk was borrower defaults on interest or principal.
Today’s world of printing press money has turned the logic of gold standard capitalism upside down. Accordingly, during the last several decades the east Asian manufacturers and petro-economies have purportedly become varacious savers and capital exporters, while the most advanced economy on the planet has become a giant capital importers. Indeed, Keynesian economists and so-called conservative monetarists alike have proclaimed these huge, chronic US current account surpluses to be a wonderful thing.
No it isn’t. Donald Trump is right—–even if for the wrong reason.
The US has borrowed approximately $8 trillion from the rest of the world since the 1970’s not pursuant to the laws of economics, as the Keynesian/monetarist consensus proclaims. Instead, the unbroken string of giant current account deficits shown below——-the basic measure of annual borrowing from abroad——were accumulated in violation of the laws of sound money; and were, in fact, enabled by Richard Nixon’s abandonment of the dollar’s convertibility to a fixed weight of gold in August 1971.
In any event, even the EM economies are not giant excess savers, as Keynesian propagandists currently argue. The Red Ponzi, for example, has run its printing presses at warp-speed for more than a quarter century. This plucked from thin air central bank credit, in turn, fueled a massive spree of domestic industrial, infrastructure and housing investment, which reached freakish extremes at upwards of 50% of GDP.
In the Keynesian GDP accounting scheme, of course, that made it appear that the hundreds of millions of Chinese workers who were being flushed from the rice paddies into China’s spanking new factors where they worked for a few dollars per hour or even less, where actually gluttonous savers.
Yet that’s an accounting illusion. When China massive mountain of debt grew from $2 trillion to $40 trillion during the last quarter century, the first round GDP effect was ultra high investment spending and off-setting business profits and household wages on the income side of the GDP ledgers.
But once removed, that “income” merely reprsented the conversion of central bank credit and the soaring bank loans it enabled into cash flow; in ordinary economic terms, it was “printed”, not earned.
That is to say, stop the Red Ponzi’s massive annual borrowing spree and investment would plummet. In turn, incomes (especially corporate profits and wages in the factory, housing and infrastructure sectors) would tumble and the illusion of high “savings” rates in the GDP accounts would essentially evaporate.
China’s Central Bank Balance Sheet Has Increased by Nearly 10X Since The Year 2000
The truth is, the end game of the so-called savings glut is already coming into view in the Red Ponzi. As shown below, the debt and investment driven growth rate (flow) is steadily falling, even as the stock of debt (green line) relative to GDP climbs ever higher.
Undoubtedly, China extended period of debt driven investment growth allowed it to print superior GDP growth numbers. But those numbers were not indicative of historically unprecedented savings glut in a backwards developing economy. The chart only tracks the greatest (and most unsustainable) economic Ponzi in recorded history.
Indeed, if the workers of China were really gluttonous savers, why would they be borrowing hand-over-fist?
Yet in just in the last 15 years, the debt-disposable income ratio has nearly quadruped.
Soaring Chinese Household Debt Ratio
The truth is, there is no savings glut in the world whatsoever. Instead, there is a massive glut of central bank driven distortions and price falsifications in the financial markets that have resulted in the absurdity of 100-year Austrian bonds trading at 187% of par.
And that kind of “glut” is not the least bit comforting; it’s a flashing red neon sign warning that the egregious financial bubbles generated by Keynesian central bankers are nearing their sell-by dates.
via ZeroHedge News https://ift.tt/2OURkOi Tyler Durden
It’s that time in the month when the results of the Bank of America Fund Manager Survey – which unfortunately has emerged as a contradictory exercise in intellectual masturbation, in which respondents answer what they’d like to respond, not what they are actually doing – are pored over by Wall Street, if only for a few brief minutes.
As a reminder, last August, when looking at the monthly Bank of America Fund Manager Survey, we pointed out a “paradox” in Wall Street sentiment that could only be attributed to schizophrenia (or merely another example of how central banks have broken markets): on one hand a record number of investors said that stocks are overvalued (they were correct), even as most investors admitted they – or their peers – are long tech stocks (they were also correct).
It is also the same survey which on one hand saw a record number of investors criticizing companies for buying back their stock, and on the other sees investors rushing to buy the stock of companies that buy back stock, almost as if the respondents can’t carry more than one fact in their head at a time.
In any case, after polling 171 survey participants with $455BN in AUM, what BofA’s CIO Michael Hartnett found in the August Fund Manager Survey (FMS) is that investors were most bullish on rates since 2008 as trade war concerns send recession risk to 8-year high.
Specifically, a net 43% FMS investors expect lower short-term rates & only 9% expect higher long-term rates over the next 12-months – taken together this is the most bullish FMS view on bonds since Nov’08.
As part of this risk revulsion, investors slashed exposure to cyclicals to buy US Treasuries and US growth stocks; with global policy stimuli at a 2.5-year low, onus is on Fed/ECB/PBoC to restore animal spirits.
And with investors fretting that fiscal policy is too restrictive, as just net 11% see monetary policy as too stimulative, Wall Street sees the current policy mix as the least stimulative since Nov’16, and only 9% see higher bond yields in the next 12 months, the most bullish stance on rates since 2008. Note:12 months ago, 90% of FMS investors expected higher short-term and 64% expected higher long-term rates.
As a result of this toxic miss of policies, one-third of FMS investors expect a global recession in the next 12 months, the highest since 2011.
And as usual, Wall Street’s hypocrisy – or perhaps stupidity – was on full display, when while investors rush to buy stocks that aggressively repurchase their stocks, in the survey, roughly hgalf of FMS investors said corporates are excessively leveraged, a new record; investors want corporates to use cash to improve balance sheets > capex or buybacks.
Right, sure they do – and right after they filled out the BofA survey, they went on to overallocate interest in the latest junk bond being issued with zero concerns about its fundamentals.
And speaking of just how fake this entire survey is – when it came to risk appetite, despite fears of imminent recession, FMS cash levels “oddly” did not surge as growth expectations plunged. In fact, a cynic would say there is absolutely no link between what investors think or say, and what they do… which is to be mostly long stocks. According to Hartnett, August cash levels fell from 5.2% to 5.1%; BofAML Bull & Bear Indicator holds at 3.7 (not extreme bearish though record net % say they have taken out protection).
So where are these survey hypocrites parking their casy now? In August, FMS investors sold cyclical value (Japan at 7-year low, industrials 2nd biggest MoM drop ever), bought defensives/growth (staples, tech) & bonds (#1 most crowded FMS trade is long US Treasuries); “growth over value” highest since GFC, the bank says.
Additionally, FMS investors said US equities are the most preferred region over the next 12 months despite 78% saying the region is overvalued – yet another example of either the sheer schizophrenia, stupidity or pathological lies that permeate Wall Street. Note the combination of two 2nd most extreme on record (#1 Aug’18).
On bubbles, FMS investors said they see the biggest central bank-induced bubble risk in:
corporate bonds (33%),
Govt bonds (30%),
US equities (26%),
gold (8%).
BofA’s trade recommendation for contrarians: be long inflation vs. deflation assets (equities>bonds, Japan>US, industrials>pharma).
“Investors are the most bullish on rates since 2008 as trade war concerns send recession risk to an 8-year high,” said Michael Hartnett, chief investment strategist. “With global policy stimuli at a 2.5-year low, the onus is on the Fed, ECB and PBoC to restore animal spirits.”
That said, we have no doubt that the central banks of the world will do whatever they need to “restore animal spirits”, even if it means they will buy each and over stock in the open market.
via ZeroHedge News https://ift.tt/2MZoauL Tyler Durden
Ten weeks of protests, some huge, a few violent, culminated Monday with a shutdown of the Hong Kong airport.
Ominously, Beijing described the violent weekend demonstrations as “deranged” acts that are “the first signs of terrorism,” and vowed a merciless crackdown on the perpetrators.
China is being pushed toward a decision it does not want to make: to use military force, as in Tiananmen Square 30 years ago, to crush the uprising. For that would reveal the character of President Xi Jinping’s Communist dictatorship, as well as Beijing’s long-term plans for this semi-autonomous city of almost 7.5 million.
Yet this is not the only internal or border concern of Xi’s regime.
Millions of Muslim Uighurs in China’s west are in concentration camps undergoing “re-education” to change their way of thinking on loyalty, secession and the creation of a new East Turkestan.
In June, a Chinese vessel rammed and sank a Philippine fishing boat, leaving its 22 crewmen to drown. The fishermen were rescued by a Vietnamese boat.
President Rodrigo Duterte’s reluctance to resist China’s fortification in the South China Sea of the rocks and reefs Manila claims are within its own territorial waters has turned Philippine nationalism anti-China.
China’s claim to Taiwan is being defied by Taipei, which just bought $2.2 billion in U.S. military equipment including Abrams tanks and Stinger missiles.
Any Taiwanese declaration of independence, China has warned, means war.
While Taiwan’s request to buy U.S. F-16s has not yet been approved, in a rare visit, Taiwan’s President Tsai Ing-wen stopped over in the U.S. recently, before traveling on to Caribbean countries that retain diplomatic relations with Taipei. Beijing has expressed its outrage at the U.S. arms sales and Tsai’s unofficial visit.
The vaunted Chinese economy is growing, at best, at half the double-digit rate of a decade ago, not enough to create the jobs needed for hundreds of millions in the countryside seeking work.
And talks have been suspended in the U.S.-China trade dispute, at the heart of which, says White House aide Peter Navarro, are Beijing’s “seven deadly sins” in dealing with the United States:
China steals our intellectual property via cybertheft, forces U.S. companies in China to transfer technology, hacks our computers, dumps into our markets to put U.S. companies out of business, subsidizes state-owned enterprises to compete with U.S. firms, manipulates its currency, and, despite our protests, ships to the USA the fentanyl drug that has become a major killer of Americans.
Such practices have enabled China to run up annual trade surpluses of $300 billion to $400 billion at our expense, and, says Navarro, have caused the loss of 70,000 factories and 5 million manufacturing jobs in the U.S.
Moreover, China has used the accumulated wealth of its huge trade surpluses to finance its drive for hegemony in Asia and beyond.
With President Donald Trump threatening 10% tariffs on $300 billion more in Chinese exports to the U.S., Xi must decide if he is willing to end his trade-war tactics against the U.S., which have gone on during the Clinton, Bush and Obama administrations. If he refuses, will he accept the de-coupling of our two economies?
Only Trump has taken on the Middle Kingdom.
If the American people and Congress are willing to play hardball and accept sacrifices, we can win this face-off. The U.S. buys five times as much from China as we sell to China. The big loser in this confrontation, if we stay the course, will not be the USA.
For three years, the U.S. establishment has not ceased to howl about Russia’s theft of emails of the DNC and Hillary Clinton campaign.
Yet the greatest cybercrime of the century was Beijing’s theft in 2014 of the personnel files of 22 million applicants and employees of the U.S. government, many of them holding top-secret clearances.
Compromised by this theft, said then FBI Director James Comey, was a “treasure trove of information about everybody who has worked for, tried to work for, or works for the United States government.”
“A very big deal from a national security … and counterintelligence perspective,” said Comey. And Xi’s China, not Putin’s Russia, committed the crime. Yet America’s elites appear to have forgotten this far graver act of cyberaggresion.
Undeniably, Russia is a rival. But Putin’s economy is the size of Italy’s while China’s economy challenges our own. And China’s population is 10 times that of Russia, and four times that of the USA.
Manifestly, China is the greater menace.
Are Americans willing to make the necessary sacrifices to force China to abide by the rules of reciprocal trade?
Or will Trump be forced by political realities to accept the long-term and ruinous relationship we have followed since granting China permanent MFN status in 2001?
This issue is likely to decide the destiny of our relations and the future of Asia, if not the world.
via ZeroHedge News https://ift.tt/2OSJFQv Tyler Durden
A naked burglary suspect was pulled out of the chimney of a home near Culver City, California on Sunday morning, according to KTLA 5.
The incident started around 7:40 in the morning on Sunday after a woman ran into a “nude intruder” inside of her home. The woman’s husband then confronted the individual, who reportedly ran away after an argument.
Police were notified and were searching for the suspect when the Los Angeles County Sheriff’s department got a call 40 minutes later about a naked man stuck in a chimney in a neighboring town.
MEANWHILE IN CALIFORNIA: Naked man possibly high on drugs burglarizes a home in Ladera Heights before being chased onto a roof by 2 Rottweilers.
He jumped down a chimney where he got stuck and started screaming for help.
Los Angeles county firefighters then responded to the scene to help the suspect free. He was promptly arrested on suspicion of burglary. The suspect was caught on video claiming that somebody had laced his drink with drugs the night before.
He can be heard saying:
“They laced me last night. They laced my drink. I would never run around in front of everybody buck naked. I’m not crazy!”
via ZeroHedge News https://ift.tt/31ABolx Tyler Durden
Just recently, Tom Lee, head of Fundstrat Global Advisors, published a list of 5-bullish signs for the stock investors which he says you should “ignore at your own peril.” As he notes:
“In short, these signals are saying the S&P 500 is set up for a monster 2H rally. We are not ignoring the negative signal of a plunge in interest rates, nor saying that a full-blown trade war is negative for the World. But, we believe the trifecta of strong US corporates, positive White House (towards biz) and dovish Fed, are major supports for the US equity market.”
His view is that the short-term disruption of the market over “trade” issues is an opportunity for investors to increase equity exposure.
Over the last few weeks, we had discussed the excessive deviation to the market above the 200-dma, which suggested that a reversal of that extension was probable. The question now is whether Tom’s view is correct?
Are the markets set up for “monster second-half rally,” or is this just the continuation of the topping process that began last year.
While these are certainly reasons to be “hopeful” that stocks will continue to rise into the future, “hope”has rarely been a fruitful investment strategy longer term. Therefore, let’s analyze each of the arguments from both perspectives to eliminate “confirmation bias.”
Economic Growth To Improve
No matter where you look as of late, economic growth has been pretty dismal. However, there is always hope for improvement that could support a recovery in asset prices.
“Still, many analysts remain optimistic that the U.S. economy can continue expanding even if growth slows down. The Citigroup Economic Surprise Index for the U.S., which measures broadly whether data points are meeting expectations, has risen sharply in recent weeks.” – WSJ
After a recent slate of feeble economic data points, the improvement should come as no real surprise. The quarterly, or annual comparisons, can certainly show some improvement. However, it should be noted the improvement is still within the context of a very negative environment, or rather, the data is just “less negative,” rather than “positive.”
This can be seen more clearly in our economic composite index, which is a broad measure of the U.S. economy including both the service and manufacturing sectors.
The problem for the bullish case is that 10-years into the current advance, there is little lifting power for monetary policy at this juncture. Yes, lower rates from the Fed could indeed provide a short-term bump to markets based solely on momentum. However, the ability to pull-forward accelerated rates of consumption to increase economic growth is much less likely. Most likely, the short-term increase in “less negative” data will turn lower as we move further into the year.
Volatility Signals A Bottom?
Volatility, as measured by the volatility index, spiked up recently. For the bulls, the spike in volatility has been a “siren’s song,” to “buy the f***ing dip.” This has been a winning strategy for investors over the last 10-years.
Is this time different? Take a look at the chart below. The volatility index is inverted for clarity purposes. The red vertical dashed line is when the monthly sell signal was issued, suggesting a reduction in equity risk in portfolios. The blue vertical dashed line is when the volatility index bottomed with extreme complacency and volatility begin a regime of trending higher.
The change in the trend of the volatility, trending lower to trending higher, is a hallmark of previous bull market peaks.
While the market is short-term oversold, combined with a surge in the VIX, the market will likely bounce short-term. However, with volatility now trending higher, that rally could be short-lived if a larger corrective cycle is beginning to take hold.
Earnings Not That Bad
“For Q2 2019 (with 77% of the companies in the S&P 500 reporting actual results), 76% of S&P 500 companies have reported a positive EPS surprise and 59% of companies have reported a positive revenue surprise.” – FactSet
On an operating basis, corporate earnings are providing the bulls boost of optimism, as hopefully, the “trade war” impact is limited. Earnings are strong, so prices should be higher.
Here’s the problem with that analysis.
As shown, for 76% of companies to beat estimates, those estimates had to be dramatically lowered. More importantly, as shown in the chart below, if we look at corporate profits for all companies, a more dire picture emerges.(The chart below strips out the profits from the Federal Reserves balance sheet.)
Despite a near 300% increase in the financial markets over the last decade, corporate profits haven’t grown since 2011. Importantly, corporate profits, have turned lower in the first quarter and that slide is continuing into the second. I have compared corporate profits, less Federal Reserve, to the Wilshire 5000 for a more comparative index.
The slide in corporate profits suggests weaker asset prices in the future as the economy, and ultimately corporate profits, continue to slow.
Sentiment Is Bearish
As Tom Lee noted in his “plea” for investors to “buy equities,” investor sentiment, very short-term is indeed negative. As shown in the chart below, the spread between bullish and bearish investors (according to AAII) is currently at -26. This is indeed a pretty bearish tilt and does suggest a short-term bottom is likely.
While that statement is true, it is a VERY short-term indicator more useful for trading rather than investing.
However, on a longer-term basis, we see that investor confidence is just about as bullish as it can get with investors outlook for stock price increases over the next 12-months near the highest levels on record.
The same is true when we look at the Commitment of Traders (COT) report which shows that speculators are just about as long as they can be in the markets.
While short-term the market could indeed rally over the next couple of weeks, investor sentiment suggests that the topping process for the markets is set to continue for a while longer.
The Fed Is Cutting Rates
Another one of Tom Lee’s points is that when the Fed cuts rates, it has previously led to a positive return over the next 6-months.
That is a true statement.
The problem is that Tom Lee isn’t going to tell you to “sell” in 6-months. There will find another reason to tell you to be bullish. This is the problem with the mainstream media, the market is “always a buy” in order to keep you buying the “products” Wall Street is selling.
For investors, the outcome of the Fed cutting rates is not a function of stronger economic growth, but a response to weaker growth, declining profitability, and lower asset prices. As I wrote last week:
“This suggests that the Fed’s ability to stem the decline of the next recession, or offset a financial shock to the economy from falling asset prices, may be much more limited than the Fed, and most investors, currently believe.
The Fed has a long history of making policy mistakes which has led to negative outcomes, crisis, bear markets, and recessions.”
It is becomingly increasingly clear from a variety of inputs that deflationary pressures are mounting in the economy. Recent declines in manufacturing, and production reports, along with the collapse in commodity prices, all suggest that something is amiss in the production side of the economy.
The Fed is going to cut rates further. Unfortunately, those rate cuts are not going to lead to higher asset prices.
What Should You Do Next
With the current bull market already up more than 300% of the 2009 lows, valuations elevated, and signs of economic weakness on the rise, investors should be questioning the potential “reward” for accelerating “risk” exposure currently. \
Ultimately, stocks are not magical pieces of paper that provide double-digit returns, every single year, over long-term time frames. Just five periods in history account for almost all the returns of the markets over the last 120 years. The other periods wiped out a bulk of the previous advance.
Too often it is forgotten during that “thrill of the chase” that stocks are ownership units of businesses. While that seems banal, future equity returns are simply a function of the value you pay today for a share of future profits.
The chart below shows that rolling 20-year real total returns from current valuation levels have been substantially less optimistic.
What is important for investors is to understand each argument and its relation to longer-term investment periods. In the short-term, Tom’s view may well be validated as current momentum and bullish “biases”persist in the markets.
However, for longer-term investors, it is worth considering the historical outcomes of the dynamics behind the financial markets currently. The is a huge difference between a short-term bullish prediction and longer-term bearish dynamics.
As Howard Ruff once stated:
“It wasn’t raining when Noah built the ark.”
via ZeroHedge News https://ift.tt/2yXqOJe Tyler Durden
The morning of Jeffrey Epstein’s death, “shouting and shrieking” could be heard from his jail cell, according to CBS News – while guards attempting to revive him were saying “breathe, Epstein, breathe.”
Epstein, who was reportedly in ‘good spirits’ recently – meeting with his lawyers for up to 12 hours a day to discuss his case – was found hanging in his Lower Manhattan jail cell with a bedsheet around his neck, which was reportedly secured to the top of a bunk bed, according to the New York Post.
On Monday, Attorney General William Barr said that the Epstein case “was personally important to him,” and that the prison had “serious irregularities.”
Notably, the staff at MCC reportedly violated prison protocol by failing to check on the high-profile inmate every 30 minutes, according to the Washington Post. Epstein, whose defense attorneys successfully lobbied for him to be taken off suicide watch about a week before he was found dead, was also supposed to have had a cellmate.
…he also should have had a cellmate, according to the person familiar with the matter and union officials representing facility employees.
But a person who had been assigned to share a cell with Epstein was transferred on Friday, and — for reasons that investigators are still exploring — he did not receive a new cellmate. –Washington Post
In a rare show of bipartisanship, the House Judiciary Committee has sent a letter to the acting director of the Bureau of Prisons, Hugh Hurwitz, demanding answers – and stating that Epstein’s reported death by hanging “demonstrates severe miscarriages of or deficiencies in inmate protocol and has allowed the deceased to ultimately evade facing justice,” according to the Miami Herald.
On Monday, the FBI raided Little St. James – Epstein’s so-called ‘orgy island,’ according to the Daily Mail, which captured footage of a dozen officers docking speedboats on the island before exploring the property on golf carts. Some agents were spotted on top of Epstein’s luxury home. All officials wore jackets with the letters ‘FBI’ in clear view.
Potential co-conspirators?
With Epstein dead, four women accused of recruiting underage girls for sex with the pedophile financier are coming into focus, including British socialite Ghislaine Maxwell – who has denied all claims. On Monday, AG Barr said that Epstein’s alleged co-conspirators “should not rest easy” just because Epstein won’t have his day in court.
“Let me assure you that case will continue on against anyone who was complicit with Epstein,” said Barr in remarks to a New Orleans law enforcement group, “Any co-conspirators should not rest easy. Victims deserve justice and will get it.”
Maxwell is said to be Epstein’s ex-girlfriend turned business associate. Her current location is unknown.
“She was more of a partner in his obsession, really,” said Miami Herald reporter Julie Brown, who spent more than two years looking into Epstein’s controversial 2008 plea deal. “And there are allegations that she was involved in having sex with some of these girls as well.”
Court documents from 2011 reveal Epstein controlled several apartments in a building just blocks from his $77 million New York townhouse and allegedly housed “underage girls from all over the world.” –CBS News
According to CBS News, Epstein’s estranged brother Mark has identified the body. Meanwhile, the autopsy reports are still pending.
via ZeroHedge News https://ift.tt/2KGEAFu Tyler Durden
It may be hard to believe after watching Monday’s market dramatics, but there is good news as well as bad. You just have to decide what dip location offers advantageous risk reward in a downdraft episode. And those levels are all over the place.
The danger is that there are also mounting opportunities for policy mistakes in how we respond, and don’t respond, to what is going on. It would be pure folly to be blase about the risks. If asset prices can reflect emotions and animal spirits as much as economics, the headlong dash by the world’s central banks to prove they can each out-dove the next one may be a strategy that is well past its sell-by date.
And, selling is precisely the way to think and worry about it. Forward guidance worked great in the aftermath of the financial crisis. Lower for longer was very much the intended message they needed people to internalize. Debates about normalizing policy anytime soon were meant to be understood as academic exercises. With little practical effect any time in the foreseeable future. And investors acted as they were expected to. But they were important discussions, nevertheless.
They gave people hope that there was an end-game here. Once they no longer believe that to be the case it becomes almost impossible to maintain the notion that the world can afford to have monetary policy as the sole support for the global economy.
It’s a reality that everyone seems to realize except the people responsible for fiscal policy and legislation.
They seem to think they can just let the help clean up the mess.
Three things remain very real perils.
People listen to the central bank messaging, become scared, and don’t spend. But they do vote. There is a legitimate reason that so many big-ticket items are going unsold. And that won’t change by going back to the zero bound. Forget the nonsense that negative rates will cause anyone to run out and buy something to get rid of what savings they have left. I’m convinced you have to have tenure to actually believe that.
And then you have the uncomfortable coexistence of businesses hesitant to make capital commitments with investors forced to keep leveraging up and buying more. Sometimes through sheer lack of better ideas involving products they don’t know sufficiently well. That’s how you get the kind of panic that we saw yesterday.
Add that to increasing government debt burdens and you eventually become permanently stuck because the pain of the unwind is just too great for the politicians to contemplate. It may well be the case that a quiet period of lower growth is what is really needed. A time cure. But, at this point that is an argument most of the world doesn’t want to hear. And it would take a brave policy maker to suggest it.
Incidentally, some well chosen and market soothing words out of Argentina and you will start to read arguments that short-dated paper is looking pretty tasty. Someone will take a stab at accumulating some two-year paper. And off we’ll go again. It’s tempting to say traders never learn. But that’s the point. They aren’t meant to.
Keep an eye on the MSCI Emerging Market Index as it approaches its support zone that begins just below 950. It’s also where we took off from at the beginning of this year.
via ZeroHedge News https://ift.tt/2KNX1YO Tyler Durden
The Pentagon’s Inspector General has launched a probe into key aspects of the DoD’s forthcoming $10 billion JEDI cloud-computing program, and has vowed to “expeditiously” review whether there was any malfeasance in the bid process – including conflicts of interest, according to Bloomberg.
“We are reviewing the DoD’s handing of the JEDI cloud acquisition, including the development of requirements and the request for proposal process,” said Pentagon IG spokeswoman Dwrena Allen in a statement, adding that a “multidisciplinary team” of auditors, attorneys and investigators are investigating JEDI matters “referred to us by Members of Congress and through the DoD Hotline.”
“In addition, we are investigating whether current or former DoD officials committed misconduct relating to the JEDI acquisition, such as whether any had any conflicts of interest related to their involvement in the acquisition process.”
Allen said the review “is ongoing and our team is making substantial progress. We recognize the importance and time sensitive nature of the issues, and we intend to complete our review as expeditiously as possible.”
The OG intends to write a report and notify Defense Secretary Mark Esper and DoD leaders of the findings, as well as inform Congress, according to standard protocols, she said. “We will also consider publicly releasing the results, consistent with our standard processes. –Bloomberg
On August 1st, Defense Secretary Esper ordered a separate review of the Pentagon’s JEDI cloud contract after President Trump supported critics saying that Amazon was given an unfair advantage.
In July, the WSJ publicized new evidence showing that senior Amazon executives met with senior DoD officials, including then-Defense Secretary James Mattis, to discuss the project before the bidding even began, while the decision over the program was expected this month.
Meanwhile, Oracle lost out on the project after losing a critical court case against the Pentagon and Amazon, allowing the DoD to move forward with either Amazon or Microsoft.
via ZeroHedge News https://ift.tt/2TsNGcU Tyler Durden
