Category: zerohedge

Authored by Joaquin Flores via The Strategic Culture Foundation,

They say hindsight is 20/20, and nothing exemplifies that more than the kind of post-mortem that can be done on the failed attempt by the US to overthrow the government of Venezuela.  Working through the lack of options that the US has in terms of regime-change in Venezuela, should lead towards a higher degree of investor confidence in the Bolivarian Republic.

We understand that there are ultimately only three ways to attack a target state until it collapses:

1. Supporting an internal coup/revolution or terrorism;

2. Economic embargo perhaps leading to or justified by 1, and;

3. Military invasion justified by the government’s reaction to 1

Then we can see that US has failed in the first two. While the US does appear on the rhetorical level to be willing to embargo the rest of planet earth, they would have to effectively do so in order to embargo Venezuela. By promoting globalization as a virtue, at the institutional level, and not simply recognizing it with problems and all as an inherent component of market economies, the US has withered its own ability to control other civilizations and states in the world’s growing multipolar system.

While the US can place sanctions on Venezuela, and get some countries to even go along with these sanctions, it only improves or strengthens the role and power of those middle-man countries like China which act as ‘value transactors’ of Venezuelan commodities into the global economy. Because it is impossible to ‘cut’ China out of the global economy, it is impossible to cut Venezuela out as well.  Given how much China is invested into Venezuela’s economy, as the Wall Street Journal notes, there’s little chance that will change either.

Despite an effort to unseat the democratically elected PSUV government, we were offered some keen insights into the US’s own self-realization regarding their failed process, and publicly so by Pompeo himself.

The level of honesty coming from the Trump administration in the US is refreshing even as it is only half the truth. When we read that Pompeo has explained that the Venezuelan opposition is ‘divided’, this is of course nothing other than good news for those concerned with regional stability, economic development, and a de-escalation of tensions that can lead towards war and instability.

It is also tremendously true, even if Pompeo doesn’t really explain why it’s the case, at least not entirely. But the facticity of the claim in itself reveals that there can be no US sponsored ‘internal regime change’ in Venezuela. Both the governments of Brazil and Colombia – close US allies under their present administrations – have ruled out any sort of military intervention into Venezuela.

Pompeo’s Confession

In comments published by the Washington Post, from an audio recording, it was reported then that Pompeo admitted that:

“We were trying to support various religious institutions so that the opposition would unite,” Pompeo remarked, going on to explain that “they [the opposition] remain divided on how to confront the Maduro regime.”

This admission came on the heels of the recorded statement to the WP, where he previously explained:

“Our dilemma, which is to keep the (Venezuelan) opposition together, has turned out to be tremendously difficult,”

He continued, saying that:

“At the moment when (Nicolás) Maduro leaves, everyone will raise their hands and say: ‘Choose me, I’m the next president of Venezuela.’”

Subsequent to that comment, he would explain that an excess of 40 different Venezuelan opposition politicians have come forward expressing their view that as Guaido is but a transitional figure, that they ought to be ‘selected’ by the US to win an actual (i.e. staged) election. This would be, ideally for them, an election that comes on the heels of an absolute restructuring of the security apparatus of Venezuela. The idea would be to ensure the marginalization of the PSUV forces from the electoral process, a ‘counter-revolution’ of sorts. The staged elections involving various opposition parties and leaders would be an afterthought in all reality. And still, there is no consensus among this opposition on who should lead.

Pompeo expressed tremendous exasperation with this state of affairs, commenting that his realization of the problem isn’t one that came about recently, but is one in fact he was aware of since he began his work in the Trump administration with the CIA. To that point he stressed that these are problems which not only manifested themselves in “public during these last months, but since the day I became director of the CIA (Central Intelligence Agency), this was something that He was at the center of what President Trump was trying to do. ”

That’s to say, Pompeo understood this problem all along. The whole project was dead on arrival.

There is no military option

Given that Venezuela can’t really be effectively more embargoed than it presently is, the US is left with one option remaining. Yes, that leaves military options, nominally on the table in terms of US pressure tactics and techniques. But the reality is that these are something much less tangible than the US has historically relied upon. A lot of this has to do with the general decline of the US military in comparative terms. While the US maintains something approximating its military capacity in absolute terms, compared to a decade or two ago, it has not managed to maintain that in relative or comparative terms. The ‘gap’ between the U.S and other rising powers, military speaking – and this reflects economic changes as well – has become smaller.  Even the Washington Post, as well as other mainstream US billionaire blogs, has admitted as much.

The fact of Venezuela’s anti-air capabilities in the form of the S-300 system are enough to bring unacceptable levels of material and human loss to the US air forces (Navy/Marine, Army, etc.). These could potentially bring the number of downed US fighters to many dozens in the first hours, of the first sortie. The loss of prestige alongside the scores of Cindy Sheehans this would produce, makes the venture a non-starter from go.

So this leaves the US in something of a conundrum. It has indeed brought Venezuela to the near point of collapse over the course of recent years, creating an economic catastrophe through a combination of sanctions and the manipulation of oil prices. But it failed to push it over the edge, and its thanks to a growing and new international consensus that this was the case.

Venezuelan leadership for its part has admitted also that there are a number of measures and policies that ought to have been in place, long term economic measure in terms of diversifying the economy that would have helped to off-set the worst of the damage done by the manipulated attack on Venezuela’s economy. We’ll recall that Russia experienced similar, based in the same manipulation of oil prices, leading to a temporary ‘shock’ to the Ruble, which plummeted in value relative to the Dollar overnight, stoking a major crisis between June and December of 2014. Russia was in a better position to manage this, and though without hiccups, has managed to avoid the sorts of repercussions that Venezuela has faced.

Strong reasons for optimism and the coming bullish trend

The inability of the US to move further against Venezuela’s economy has only given Caracas time, and organization, to work around them. These work-around measures by Venezuela can improve, but the distance between the economic attacks from the US, and the operationalizing of Guiado in a coup gambit, was too great for the US to use them in combination in an effective way.

It’s worth noting also that the general ‘game plan’ of the US has been effectively written about, expounded publicly, and absorbed by private intelligence agencies and government networks alike. The science and art of regime change has given rise to the science and art of the counter-coup.

When we understand that there is no really viable military option, Caracas knows that it is bracing for further acts of terrorism and sabotage on its critical infrastructure. International help in combatting such state-sponsored terrorism, as reported by Venezuelan state news agency TeleSur has already been had, however, and so we can expect that we will see how effective this has been through the lack of much materializing in this direction.

Taken all together, the essentials for a rebounded Venezuelan economy are in place. Investor confidence and the assurances to Spanish, and therefore by extension German, banking interests operating without the US as a middle-man in Latin America, are well-founded and lead towards a bullish trend.

As a post-mortem on the US’s failed regime change operation in Venezuela, it is an excellent case study in how the international community can properly deal with and respond to the often irrational and potentially destabilizing actions of former global hegemons when in a state of decline. As far as Venezuela is concerned, it’s an excellent case study in sovereignty in the 21st century, despite a west-centric socio-economic focus on globalization.

via ZeroHedge News http://bit.ly/2J4Rg8d Tyler Durden

Researchers wondered what the nation’s most selective colleges and universities would look like if they admitted students solely on the basis of SAT scores.

Their answer: Campuses would be wealthier, whiter, and more male.

Horror of horrors, we know, but there’s no arguing with the data from the Georgetown Universitry study. As The Wall Street Journal reports, rather shockingly to many, more than half the students now enrolled at the top 200 colleges and universities would lose their seats to students who performed better on the SAT.

The result, as the chart below shows, is that black and Latino students, would be worst-affected with enrolments cut nearly in half, to 11% of all students from 19%.

Source: Wall Street Journal

The share of Asian students would slip to 10% from 11%. The principal winners were wealthy white male students, whose ranks would increase. But a large number of white students would lose their seats and be replaced with other white students.

“The SAT does not and should not measure excellence on its own. Data are overwhelming that grades and test scores together better predict college success than either does alone,” a spokesman for The College Board said in a statement.

“Comprehensive research demonstrates that sustained commitment to an activity in high school outside of class further predicts success in college and beyond. Resourcefulness in response to challenges has long been honored in college admissions as a dimension of merit and success in life. A focus on a single score would leave so much talent unseen.”

So black and Latino college enrolment is almost twice what it would be based on “merit” alone, and this is before The College Board introduces its so-called “adversity score” to accompany a student’s SAT results.

All of which has us wondering, how long before well-off, so-called ‘advantaged’ families start moving into poor lower-class neighborhoods for just long enough to benefit from the adversity score… making it even easier to game the system for the wealthy? (Easier than paying off cheats to take SATs or bribing soccer and crew teams for entry).

Jeremy Frost summed this farce up best:

“Education by its nature is supposed to be elitist, the better you preform the greater your opportunities. This is just madness, it undermines the entire point of selective admission to institutions of higher education.”

This unbelievable factor in the college admission process discriminates against hard-work and true academic achievement when America, as a nation, is rapidly sliding down the global scale of intelligence as it is.

As The Council of Foreign Relations detailed, among people ages 55 to 64, Americans rank first in the percentage who’ve earned high school degrees and third in those who’ve earned college and graduate degrees. But Americans ages 25 to 34 only rank 10th in the world in high school diplomas, and they’ve dropped to 13th in attaining post-secondary degrees.

U.S. vs. Global Education Attainment Rankings by Age

It’s not that 25-to-34-year-olds are less educated than boomers: 88 percent of them earned high school diplomas, compared with 90 percent of boomers, and they actually managed a tiny edge – 42 percent to 41 percent – in post-secondary degrees. The real problem is that they’re slipping in relation to their global counterparts.

Paradoxically, younger Americans are entering college at a higher rate – 70 percent – than the boomer generation managed. In 1970, only 48.4 percent of high school graduates went on to higher education, according to a study published in 2010 in the American Journal of Applied Economics. But that edge is negated, because fewer than half of today’s students manage to stay in school and earn degrees, a slightly lower completion rate than boomers.  

Finally, one wonders if the graduation rate is going to be monitored between the high and low student’s adversity scores? If not, why not? It would seem that without such information no valid evaluation of the program can be made. And as Mark Soane concludes:

“The SAT was the last bastion of objective measurement in the sea of subjectivity that makes up a college application.  It is profoundly disappointing to see that the SAT is now subject to the same identity politics bias that everything else is in college admissions.  The SAT and the ACT were the best predictors of college preparedness. 

If you debase the results, you will get one or all of the following:  higher dropout rates; debased teaching standards, resentment and distrust among students.”

Lawsuits charging unfair admission practices have also been filed against the University of North Carolina at Chapel Hill and the University of California system.

How do we look our kids in the eyes, urge them to work their hardest, study endlessly, never stop trying because that’s what counts in America… and then apologize for reducing their chance of making it to their dream school by daring to live in a low-crime, low-poverty, high-cost, two-parent home.

via ZeroHedge News http://bit.ly/2XwhutC Tyler Durden

Authored by Charles Hugh Smith via OfTwoMinds blog,

Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal Oligarchy.

The Inheritance of Rome: Illuminating the Dark Ages 400-1000 is not an easy, breezy read; its length and detail are daunting.

The effort is well worth it, as the book helps us understand how the power structures of societies change over time in ways that may be largely invisible to those living through the changes.

The Inheritance of Rome focuses on the lasting influence of Rome’s centralized social and political structures even as centralized economic power and trade routes dissolved.

This legacy of centralized power and loyalty to a central authority manifested 324 years after the end of the Western Roman Empire circa 476 A.D. in Charlemagne, who united much of western Europe as the head of the Holy Roman Empire. (Recall that the Eastern Roman (Byzantine) Empire endured another 1,000 years until 1453 A.D.)

But thereafter, the social and political strands tying far-flung villages and fiefdoms to a central authority frayed and were replaced by a decentralized feudalism in which peasants were largely stripped of the right to own land and became the chattel of independent nobles.

In this disintegrative phase, the central authority invested in the monarchy of kings and queens was weak to non-existent.

In the long sweep of history, it took several hundred years beyond 1000 A.D. for central authority to re-assert itself in the form of monarchy, and several hundred additional years for the rights of commoners to be established.

Indeed, it can be argued that it was not until the 1600s and 1700s–and only in the northern European strongholds of commoners’ rights, The Netherlands and England–that the rights of ownership and political influence enjoyed by commoners in the Roman Empire were matched.

It can even be argued that the rights of Roman citizenship granted to every resident of the late Empire were only matched in the 19th and 20th centuries.

The rights of commoners were slowly chipped away by civil authorities and transferred to the feudal nobility. As the book explains, these rights included limited self-rule within village councils and ownership of land. These rights were extinguished by feudalism.

The connections between these civil society/legal freedoms (of self-rule and ownership of land/capital), the Protestant Reformation and the birth of modern Capitalism are explained by historian Fernand Braudel’s masterful 3-volume history Civilization and Capitalism, 15th-18th Century, a series I have long recommended:

The Structures of Everyday Life (Volume 1) The Wheels of Commerce (Volume 2) The Perspective of the World (Volume 3)

The self-reinforcing dynamics of religious, civil and economic freedoms are key to understanding the transition from feudalism/monarchy to the world systems of today, in which some form of self-rule or political influence and economic freedom are expected of every civil authority.

Let’s fast-forward to today and ask what relevance these histories have in the present era.

There are two points worth discussing. One is the acceleration of change; what took 300 years now takes 30, or perhaps less.

The second is the slow erosion of commoners’ self-rule and ownership of meaningful, productive capital.

This gradual, almost imperceptible erosion is what I call neofeudalism, a process of transferring political and economic power from commoners to a new Financial Aristocracy/Nobility.

If we examine the “wealth” of the middle class/working class (however you define them, the defining characteristic of both is the reliance on labor for income, as opposed to living off the income earned by capital), we find the primary capital asset is the family home, which as I have explained many times, is unproductive–in essence, a form of consumption rather than a source of income.

Ultimately, all pensions, public and private, are controlled by central authorities, even though “ownership” is nominally held by commoners. (Ask middle class Venezuelans what their pensions are worth once central authorities debauch the nation’s currency.)

In a globalized, financialized economy, the only capital worth owning is mobile capital, capital that can be shifted by a keystroke to avoid devaluation or earn a a higher return.

Housing and pensions are “stranded capital,” forms of capital that are not mobile unless they are liquidated before crises or expropriations occur.

I am also struck by the ever-rising barriers to starting or even operating small businesses, a core form of capital, as enterprises generate income and (potentially) capital gains.

The capital and managerial expertise required to launch and grow a legal enterprise is extraordinarily high, which is at least partly why a nation of self-employed farmers, shopkeepers, artisans and traders is now a nation of employees of government and large corporations.

What sort of capital can be acquired by the average commoner now? Enough to match the wealth and political power of financial Nobility? This is the source of our fascination with tech millionaires and billionaires: a few commoners have leveraged technology to join the Nobility.

As for political influence: a recent study found that voters had very little power in the U.S., which is effectively an oligarchy: Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.

Summary: “The U.S. government does not represent the interests of the majority of the country’s citizens, but is instead ruled by those of the rich and powerful, a new study from Princeton and Northwestern universities has concluded.”

Neofeudalism is not a re-run of feudalism. It’s a new and improved, state-corporate version of indentured servitude. The process of devolving from central political power to feudalism required the erosion of peasants’ rights to own productive assets, which in an agrarian economy meant ownership of land.

Ownership of land was replaced with various obligations to the local feudal lord or monastery– free labor for time periods ranging from a few days to months; a share of one’s grain harvest, and so on.

The other key dynamic of feudalism was the removal of the peasantry from the public sphere. In the pre-feudal era (for example, the reign of Charlemagne), peasants could still attend public councils and make their voices heard, and there was a rough system of justice in which peasants could petition authorities for redress.

From the capitalist perspective, feudalism restricted serfs’ access to cash markets where they could sell their labor or harvests. The key feature of capitalism isn’t just markets– it’s unrestricted ownership of productive assets–land, tools, workshops, and the social capital of skills, networks, trading associations, guilds, etc.

Our system is Neofeudal because the non-elites have no real voice in the public sphere, and ownership of productive capital is indirectly suppressed by the state-corporate duopoly.

Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal Oligarchy.

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format. My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

via ZeroHedge News http://bit.ly/2J144ws Tyler Durden

Authored by Charles Hugh Smith via OfTwoMinds blog,

Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal Oligarchy.

The Inheritance of Rome: Illuminating the Dark Ages 400-1000 is not an easy, breezy read; its length and detail are daunting.

The effort is well worth it, as the book helps us understand how the power structures of societies change over time in ways that may be largely invisible to those living through the changes.

The Inheritance of Rome focuses on the lasting influence of Rome’s centralized social and political structures even as centralized economic power and trade routes dissolved.

This legacy of centralized power and loyalty to a central authority manifested 324 years after the end of the Western Roman Empire circa 476 A.D. in Charlemagne, who united much of western Europe as the head of the Holy Roman Empire. (Recall that the Eastern Roman (Byzantine) Empire endured another 1,000 years until 1453 A.D.)

But thereafter, the social and political strands tying far-flung villages and fiefdoms to a central authority frayed and were replaced by a decentralized feudalism in which peasants were largely stripped of the right to own land and became the chattel of independent nobles.

In this disintegrative phase, the central authority invested in the monarchy of kings and queens was weak to non-existent.

In the long sweep of history, it took several hundred years beyond 1000 A.D. for central authority to re-assert itself in the form of monarchy, and several hundred additional years for the rights of commoners to be established.

Indeed, it can be argued that it was not until the 1600s and 1700s–and only in the northern European strongholds of commoners’ rights, The Netherlands and England–that the rights of ownership and political influence enjoyed by commoners in the Roman Empire were matched.

It can even be argued that the rights of Roman citizenship granted to every resident of the late Empire were only matched in the 19th and 20th centuries.

The rights of commoners were slowly chipped away by civil authorities and transferred to the feudal nobility. As the book explains, these rights included limited self-rule within village councils and ownership of land. These rights were extinguished by feudalism.

The connections between these civil society/legal freedoms (of self-rule and ownership of land/capital), the Protestant Reformation and the birth of modern Capitalism are explained by historian Fernand Braudel’s masterful 3-volume history Civilization and Capitalism, 15th-18th Century, a series I have long recommended:

The Structures of Everyday Life (Volume 1) The Wheels of Commerce (Volume 2) The Perspective of the World (Volume 3)

The self-reinforcing dynamics of religious, civil and economic freedoms are key to understanding the transition from feudalism/monarchy to the world systems of today, in which some form of self-rule or political influence and economic freedom are expected of every civil authority.

Let’s fast-forward to today and ask what relevance these histories have in the present era.

There are two points worth discussing. One is the acceleration of change; what took 300 years now takes 30, or perhaps less.

The second is the slow erosion of commoners’ self-rule and ownership of meaningful, productive capital.

This gradual, almost imperceptible erosion is what I call neofeudalism, a process of transferring political and economic power from commoners to a new Financial Aristocracy/Nobility.

If we examine the “wealth” of the middle class/working class (however you define them, the defining characteristic of both is the reliance on labor for income, as opposed to living off the income earned by capital), we find the primary capital asset is the family home, which as I have explained many times, is unproductive–in essence, a form of consumption rather than a source of income.

Ultimately, all pensions, public and private, are controlled by central authorities, even though “ownership” is nominally held by commoners. (Ask middle class Venezuelans what their pensions are worth once central authorities debauch the nation’s currency.)

In a globalized, financialized economy, the only capital worth owning is mobile capital, capital that can be shifted by a keystroke to avoid devaluation or earn a a higher return.

Housing and pensions are “stranded capital,” forms of capital that are not mobile unless they are liquidated before crises or expropriations occur.

I am also struck by the ever-rising barriers to starting or even operating small businesses, a core form of capital, as enterprises generate income and (potentially) capital gains.

The capital and managerial expertise required to launch and grow a legal enterprise is extraordinarily high, which is at least partly why a nation of self-employed farmers, shopkeepers, artisans and traders is now a nation of employees of government and large corporations.

What sort of capital can be acquired by the average commoner now? Enough to match the wealth and political power of financial Nobility? This is the source of our fascination with tech millionaires and billionaires: a few commoners have leveraged technology to join the Nobility.

As for political influence: a recent study found that voters had very little power in the U.S., which is effectively an oligarchy: Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.

Summary: “The U.S. government does not represent the interests of the majority of the country’s citizens, but is instead ruled by those of the rich and powerful, a new study from Princeton and Northwestern universities has concluded.”

Neofeudalism is not a re-run of feudalism. It’s a new and improved, state-corporate version of indentured servitude. The process of devolving from central political power to feudalism required the erosion of peasants’ rights to own productive assets, which in an agrarian economy meant ownership of land.

Ownership of land was replaced with various obligations to the local feudal lord or monastery– free labor for time periods ranging from a few days to months; a share of one’s grain harvest, and so on.

The other key dynamic of feudalism was the removal of the peasantry from the public sphere. In the pre-feudal era (for example, the reign of Charlemagne), peasants could still attend public councils and make their voices heard, and there was a rough system of justice in which peasants could petition authorities for redress.

From the capitalist perspective, feudalism restricted serfs’ access to cash markets where they could sell their labor or harvests. The key feature of capitalism isn’t just markets– it’s unrestricted ownership of productive assets–land, tools, workshops, and the social capital of skills, networks, trading associations, guilds, etc.

Our system is Neofeudal because the non-elites have no real voice in the public sphere, and ownership of productive capital is indirectly suppressed by the state-corporate duopoly.

Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal Oligarchy.

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format. My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

via ZeroHedge News http://bit.ly/2J144ws Tyler Durden

Establishment comedian Bill Maher warned that if 2020 Democrats run “a campaign based on reparations and concentration camps” it will be “very hard to win the election” against President Trump. 

Maher was responding last week’s latest outrage when Rep. Alexandria Ocasio-Cortez (D-NY) called migrant detention facilities to “concentration camps,” a remark she has doubled and tripled-down on despite receiving considerable backlash from Jewish groups and others over the comparison. 

While conservative political consultant Liz Mair tried to argue that Democrats can win the argument without invoking Nazi Germany, liberal guests Thom Hartmann and Dan Savage disagreed, with Savage arguing “the use of the term concentration camp has caused people to debate what is actually going on.” Mair replied “that was already happening,” to which a triggered Savage spat back “these are fucking concentration camps.“ 

Maher pushed back. 

“Come on, when we think of concentration camps, I think of mass graves, I think of experimenting on human people.” 

“If you want to run a campaign based on reparations and concentration camps, then it’s going to be very hard to win the election, I’m not saying you can’t do it, I’m not saying you can’t do it, but very hard to argue that this is helping,” said Maher. 

 

via ZeroHedge News http://bit.ly/2FtZpSP Tyler Durden

Authored by Jake Anderson via The Mind Unleashed blog,

New research into black holes has accelerated in recent years, producing some outlandish – though mind boggling – ideas. The newest theoryadvanced by researchers may take the cake in this regard.

A team of astrophysicists at Canada’s University of Waterloo have put forth a theory suggesting that our universe exists inside the event horizon of a massive higher dimensional black hole nested within a larger mother universe.

Perhaps even more strangely, scientists say this radical proposition is consistent with astronomical and cosmological observations and that theoretically, such a reality could inch us closer to the long-awaited theory of “quantum gravity.”

The research team at Waterloo used laws from string theory to imagine a lower-dimensional universe marooned inside the membrane of a higher dimensional one.

Lead researcher Robert Mann said:

”The basic idea was that maybe the singularity of the universe is like the singularity at the centre of a black hole. The idea was in some sense motivated by trying to unify the notion of singularity, or what is incompleteness in general relativity between black holes and cosmology. And so out of that came the idea that the Big Bang would be analogous to the formation of a black hole, but kind of in reverse.”

The research was based on the previous work of professor Niayesh Afshordi, though he is hardly the only scientist who has looked into the possibility of a black hole singularity birthing a universe.  

Nikodem Poplawski of the University of New Haven imagines the seed of the universe like the seed of a plant – a core of fundamental information compressed inside of a shell that shields it from the outside world. Poplawski says this is essentially what a black hole is, a protective shell around a black hole singularity ravaged by extreme tidal forces creating a kind of torsion mechanism.

Compressed tightly enough – as scientists imagine is the case at the singularity of a black hole, which may break down the known laws of physics – the torsion could produce a spring-loaded effect comparable to a jack-in-the-box. The subsequent “big bounce” may have been our Big Bang, which took place inside the collapsed remnants of a five-dimensional star.

Poplawski also suggested that black holes could be portals connecting universes. Each black hole, he says, could be a “one-way door” to another universe, or perhaps the multiverse.

Regardless of whether or not this provocative theory is true, scientists increasingly believe that black holes could be the key to understanding many of the most vexing mysteries in the universe, including the Big Bang, inflation, and dark energy. Physicists also believe black holes could help bridge the divide between quantum mechanics and Einstein’s theory of relativity.

via ZeroHedge News http://bit.ly/2KxA8eL Tyler Durden

Amid record high asset prices in virtually everything following last week’s dovish FOMC, a fresh concern has emerged: the gaping “alligator jaws” between bond yields and stocks have never been wider, with the latest thrust coming first after Powell’s early June admission that an easing cycle is imminent, following by last week’s even more dovish FOMC announcement, which confirmed that a July rate cut is in the books, and sent stocks to new all time highs, while bond yields tumbled below 2%, the lowest in three years.

The problem boils down to one simple observation: on one hand stocks are telegraphing substantial market upside and, at least in theory, a booming economy, while bond yields – at 3 year lows – are screaming recession.

Some Wall Street strategists, such as Deutsche Bank’s Aleksandar Kocic took on a traditionally whimsical approach to the problem and explained it in the context of Schrödinger paradox… or in his case plates:

In the same way as Schrödinger plates, the economy at the moment is in a superposition of two states – it is both booming and it is headed for a recession. The two states of the economy are entangled. However, we cannot know which state we are in without interfering with it.

And visually:

The extended metaphor – which we discussed extensively yesterday – culminated with the following dilemma:

If the Fed does not cut rates (we open the door), the recession is likely.

If the Fed cuts rates, however (we do not open the door), the recession is averted, but we wouldn’t know if the cuts were needed.

His conclusion: “in either case, Fed actions interfere with the state of the economy and affect the outcome, and in both cases we face the consequences.” What is more troubling is that we have reached a point where the consequences of the Fed’s actions are dire in either case, resulting in either recession or loss of Fed credibility and independence:

In the case of unresponsive Fed it is a recession, while in the case of an accommodative Fed it is the loss of central bank independence and potentially another round of trade wars and even more pressure on the Fed to cut rates with further markets addiction to stimulus and possibly higher inflation etc.

In not so many words, that is the ultimate Catch 22 that the Fed has created: the market and economy are only viable as long as the Fed is backstopping them; once the support goes away, the wave function – to extend the flawed analogy – of the economy and market collapses, and the true state of both is exposed (at the cost of trillion in risk asset losses).

Others have observed the ongoing divergence between risk assets and yields at a more simplistic level, and as Bloomberg observes, the moves have extended the “dueling bull market” theme in which Treasury traders fret about dimming growth while everyone else celebrates an accommodative Fed. Each camp expects it to end badly for the other.

“A race of this pace in both stocks and fixed income is unsustainable,” said Marshall Front, the chief investment officer at Front Barnett Associates. “People who were long bonds are going to have a problem. We’re not going to have a recession or a dip in economic activity that’s going to take us off course, and rates are going to go back up.”

Others are similarly perplexed:

“There’s been a lot of press suggesting that the bond and stock markets are conveying different messages to investors,” said Mark Heppenstall, chief investment officer of Penn Mutual Asset Management. “But to me where we stand in interest rates today, where we stand in persistent low inflation today means that whatever investors are willing to pay for earnings should be higher based on the fact that interest rates are lower.”

To be sure, the recent movement in asset classes has been a gift to those portfolios which are long both sets of assets, modeled on the classic 60/40 stock-bond allocation, and which in Q1 of 2019 enjoyed the best period for the strategy in nearly a decade, and now it looks as though those gains are set to grow come the end of the second.

Meanwhile, as Bloomberg notes, “for the naturally skeptical, it’s hard to watch everything go up at once without conjuring visions of bubbles doomed to pop.” Of course, everything is only going up because the Fed is doing, or at least saying (for now) whatever the market wants to hear, in the process making this decoupling even greater.

* * *

There is another key observation: maybe the surge in both bonds and stocks is not an ill omen, but perfectly self-explanatory. This is the argument made in a Friday note from JPM’s Nikolaos Panagirtzoglou, in which the derivatives strategist writes that while this year’s co-movement of bonds and equities seems rather unusual, “it is actually more common than typically thought. In fact a co-movement between equities and bonds has been in place as a broad trend for most of the past few years. This is shown in Figure 1 which depicts the MSCI AC World index along with the Bloomberg Global Agg total return index currency unhedged. The two indices have been trending up sometimes in tandem over the past six years. More importantly, any significant deviations between the two were not sustained for more than a few months.”

But what explains this “unnatural” co-movement, which – all else equal – telegraph a future beset with both inflation and deflation? In JPM’s opinion the prevalence of fixed-weight allocation frameworks among investors, such as 60:40 risk-parity and balanced funds, retail investors, pension funds and SWFs (e.g. the Norges Bank), “are responsible to a significant extent for this co-movement between equities and bonds.”

Here are the mechanics, as explained by Panigirtzoglou: When the bond market expands because of a strong bond rally  like this year, these fixed weight allocation investors find themselves overweight bonds and underweight equities and thus need to buy equities to rebalance their portfolios in line with their rebalancing thresholds. Via this rebalancing these fixed weight investors push equity prices up and thus a bond rally ends up inducing an equity rally. And the intensification of this year’s bond rally in May and June has put even more pressure on such investors to rebalance away from bonds or deploy available funds into equities.”

This, to an extent, is a paraphrase of the “Fed model” which suggests that the lower rates drop, the higher equities rise as investors are forced into riskier assets to make up for the lack of yield in risk-free securities.

One way to quantify the divergence practically is to look at the allocation to bonds and stocks across the world’s investors. To do this, JPMorgan excludes banks – entities that typically invest in bonds rather than equities – and focuses on the universe of non-bank entities, finding the the amount of bonds held by this group of investors is around $32trillion and unchanged from the end of 2016. This compares to $54tr of cash and $67tr of equities based on DataStream’s global equity index universe. More importantly, on a percentage basis, non-bank investors, which invest in both bonds and equities globally, have an allocation to bonds of 21.1% currently (Figure 2). This 21.1% bond allocation
is just above the post Lehman historical average and well above the 19% low seen in September last year.

This is an important difference to last year. This year’s bond rally which gathered pace in recent weeks has unwound entirely the large bond underweight that had emerged in September last year.

Meanwhile, over on the equity side, the mirror image of this unwinding of the previous bond underweight is that the current equity overweight is significantly smaller from that seen in September last year, which at 45.5% represented a post Lehman high at the time.

So, according to JPMorgan, despite global equity prices being close to the highs of last September, investors are not as OW in equities as they were last September simply because bond markets rallied strongly this year making them less UW in bonds, or to put it another way:

“this year’s bond rally has been boosting equities by creating more room for investors to increase their equity allocations. This is shown in Figure 3 which shows that investors globally have an allocation to equities of 43.6% currently, which is somewhere in between the post Lehman high of 45.5% seen last September and the recent low of 41.8% seen last December. This 43.6% represents an OW equity allocation as it is above both the 40% post Lehman average and the 43% longer-term historical average.”

But to all those who say that it is only a matter of time before stocks see the prior, post-Lehman highs, JPM says “not so fast”, because while allocations could theoretically approach their previous cyclical extremes, there are two reasons why previous levels are less likely to be achieved.

1. The first is that already over the previous two cycles, the cyclical peak in equity allocations had already been declining, and the cyclical trough in bond allocations rising, likely reflecting structural and demographic changes over time. Given the structural changes in markets and economies in the post-Lehman environment, this suggests that post-Lehman period comparisons are more relevant.
2. The second is that G4 central banks may have to shift to even more aggressive QE programs going forward than those seen over the past decade, in order to induce the non-bank private sector to shed even more bonds from here.

So with that in mind, and by looking at Figure 3, one simple way of thinking about the upside for equities from here according to Panigirtzoglou is “to calculate the rise in equity prices needed for investors to become as OW in equities as they were last September.” According to JPM’s calculations global equities would need to rise by 7.8% from here ceteris paribus to make investors as OW in equities as last September. In other words, assuming no further upside for bonds from here, any upside for equities should be limited to high single digits.

There are some more reasons why this this potential single-digit equity upside is facing several challenges.

1. The first one is the extreme cash UW that has emerged this year as a result of the simultaneously strong rally in bonds and equities. Indeed, this is shown in the next chart below, which shows an implied cash allocation by investors globally of 34.3%, the lowest in the post Lehman period and the lowest since 2007.
2. The second challenge is the extremity of this year’s bond rally. It is true that, given the prospect of central banks cutting rates from here, the extremity of this year’s cash underweight and the extremity of this year’s bond rally are perhaps justified.

But what if rate markets got ahead of themselves? What if the gloom scenario postulated by Kocic does not materialize, and “central banks fail to validate market expectations over the coming months?” – this would be the scenario which the Deutsche Bank strategist yesterday wrote would lead to a recession (as the wave function of the “plates” collapses… and so do they).

In a nutshell, to the top JPMorgan strategist, “this is a major risk for equity markets going forward: if central banks fail to validate over the coming months market expectations of universal rate cuts, equities could be hit not only by a potential selloff in bonds that would mechanically make investors more OW in equities, but also by a potential increase in cash allocations as investors cover their currently extreme cash UW.”

To JPMorgan, this potential for market disappointment emerging from the Fed as framed by this discussion (and yesterday, by Deutsche Bank), shows the challenge equity markets are facing going forward.

Said otherwise, as hinted by James Bullard’s letter explaining why he objected to the Fed’s latest decision to keep rates unchanged, the prevailing thesis is that equity markets appear to be pricing in at the moment is of a pre-emptive Fed that is set to provide insurance similar to the 1995 and 1998 episodes.

But is it?

In a scenario where the Fed and/or other central banks fail to cut by as much as markets expect, perhaps because growth turns out to be better than expected, the upside for equities from better growth news could be offset by a bond selloff via the mechanism described above.

Finally, in the third and most painful for the bulls, scenario where the Fed and/or other central banks end up being rather reactive and cut rates in response to weak growth, equities could follow a weak trajectory similar to more typical previous Fed easing cycles, rather than the strong trajectory seen during 1995 or 1998. For those who need a reminder, it is also the case that the last three recessions all followed within a few months after the Fed’s first rate cut. Furthermore as @Northmantrader recently pointed out, every time the FED cut their rates while unemployment was below 4%, a recession started almost immediately?

In other words, of the above three scenarios only one scenario, that of a pre-emptive Fed that is set to provide insurance similar to the 1995 and 1998 episodes, is positive for equities. 

And here a problem emerges, because as Bullard explained last week, preemptive means cutting rates when growth indicators are still good rather than waiting for growth indicators to weaken.

And this brings up what JPMorgan believes is the most important question following this week’s FOMC meeting:

“If the Fed is truly committed to preemptive rate cuts in order to provide insurance why did it not cut its policy rate this week?”

* * *

And while not necessarily connected to JPM’s line of reasoning, if perfectly summarizing the zeitgeist on the continued Fed manipulation and intervention in markets, here is a must-read quote from Steve Chiavarone, a portfolio manager with Federated Investors: 

“Everyone, whether they admit it or not, believes that there needs to be some major comeuppance, some cleansing moment, because for whatever reason the good puritan instinct that lies in America feels as though you can only cleanse through some level of pain. There’s an obsession of when the next recession is going to come. What I think has been forgotten is that if you want lower for longer, you also have to accept the longer part of it. And that’s what we’re getting.”

We are indeed, but with the business cycle set to become the longest in history in just one week…

… the questions of just how much longer can the Fed keep indefinitely postponing the “longer” part will only grow louder, until finally not even the monetary Atlas that is Jay Powell, can keep the sky from falling any longer.

via ZeroHedge News http://bit.ly/2N9713n Tyler Durden

Democratic Presidential nominees appear to be in a race to the bottom, or lowest common identity-politics denominator as their virtue-signaling knows no bounds.

After a week of discussions about reparations for slavery – soundly dismissed by numerous African American speakers – Senator Elizabeth Warren has tried to outdo her opponents by seeking reparations for another group of repressed and long-suffering individuals.

Warren reintroduced the Refund Equality Act, a bill that would allow same-sex couples to amend past tax returns and receive refunds from the IRS.

“The federal government forced legally married same-sex couples in Massachusetts to file as individuals and pay more in taxes for almost a decade,” Warren said in a statement.

“We need to call out that discrimination and to make it right – Congress should pass the Refund Equality Act immediately.”

As NBC News reports, a report by the Joint Committee on Taxation released Tuesday estimated that taxpayers who were in same-sex marriages prior to the repeal of the Defense of Marriage Act in 2013 would be eligible for up to $57 million in refunds. Warren introduced a version of the bill in 2017.

I’m glad to introduce the Refund Equality Act in the Senate. Our bill ensures legally-married, same-sex couples can claim the tax refunds they earned, but were denied before marriage equality was the law of the land. https://t.co/01rgfSiXUQ

— Elizabeth Warren (@ewarren) June 20, 2019

As we concluded in March, after noting the spread of ‘reparations’ is now a worldwide phenomona, guilt is not a constructive emotion on a personal level – it prevents us from letting go of the past and moving on with life.

Could this be true on a societal level, too? The phenomena of virtue-signaling – fooling ourselves and others into thinking we are making a positive difference with ostentatious displays of do-gooding – is a common way of temporarily allaying this social guilt without requiring the sacrifice or work of genuinely creating change in the world. Thus, we remain stuck in a downward-spiral of self-loathing, while simultaneously failing to correct the ongoing injustices we see around us.

via ZeroHedge News http://bit.ly/2XtYqvX Tyler Durden

Authored by Caitlin Johnstone via Medium.com,

“We are putting major additional Sanctions on Iran on Monday,” President Trump tweeted today.

“I look forward to the day that Sanctions come off Iran, and they become a productive and prosperous nation again — The sooner the better!”

Iran’s economy is already floundering due to the steadily mounting sanctionsthat the Trump administration has been heaping upon it since its withdrawal from the JCPOA last year. Crucial goods are four times the price they used to be, sick Iranians are having difficulty obtaining life-saving medicine, and life in general has been getting much more difficult for the poorest and frailest Iranian civilians.

For this reason, it is a very safe bet that there have been Iranians who have died because of the sanctions. Being unable to obtain enough life-saving medicine will inevitably increase mortality rates, as will inadequate nutrition and care for those whose health is at risk. There’s not really any way around that, and it’s only going to get worse.

And that’s exactly what was supposed to happen. As far as their intended purpose is concerned, the sanctions are working. They’re doing exactly what they were intended to do: hurt Iranian civilians.

How do I know this? Well for one thing America’s Secretary of State has said it openly. The New York Times reports the following:

Last week, Mr. Pompeo acknowledged to Michael J. Morrell, a former acting director of the C.I.A., that the administration’s strategy would not persuade Iranian leaders to change their behavior.

“I think what can change is the people can change the government,” he said on a podcast hosted by Mr. Morrell, in what appeared to be an endorsement of regime change.

The Trump administration isn’t leveling these sanctions because it believes they’ll cause Tehran to capitulate to Washington’s impossible list of demands; they know full well that that will never happen. What they claim, based on no evidence or historical precedent whatsoever, is that by making life so painful for the hungry and malnourished Iranian people they’ll be forced to rise up against their government to effect regime change themselves.

Can you think of anything more sociopathic than this? Off the top of my head, I personally cannot.

….Death to America. I terminated deal, which was not even ratified by Congress, and imposed strong sanctions. They are a much weakened nation today than at the beginning of my Presidency, when they were causing major problems throughout the Middle East. Now they are Bust!….

— Donald J. Trump (@realDonaldTrump) June 21, 2019

Starvation sanctions kill people. Tens of thousands of Venezuelans have reportedly already died as a result of this administration’s relentless assault on their economy; those human beings are no less dead than they would have been if the US had killed them by dropping cluster bombs on Caracas. Yet these deaths have received virtually no mainstream media coverage, and Americans, while they strongly oppose attacking Iran militarily, have had very little to say about Trump’s attacks on the nation’s economy. The economy which people use to feed their children, to care for their elderly and their sick.

I’m titling this essay “Starvation Sanctions Are Worse Than Overt Warfare”, and I mean it. I am not saying that starvation sanctions are more destructive or deadly than overt military force in and of themselves; what I am saying is that the overall effect is worse, because there’s no public accountability for them and because they deliberately target civilians.

If the US were to launch a barrage of Tomahawk missiles into an Iranian suburb with the goal of killing civilians, there’d be international outrage and the cohesion of the US-centralized power alliance would take a major hit. Virtually everyone would recognize this as an unforgivable war crime. Yet America will be able to kill the same number of civilians with the same deliberate intention of inflicting deadly force, and it would suffer essentially no consequences at all. There’s no public or international pressure holding that form of violence at bay, because it’s invisible and poorly understood.

It reminds me of the way financial abuse gets overlooked and under-appreciated in our society. Financial abuse can be more painful and imprisoning than physical or psychological abuse (and I speak from experience), especially if you have children, yet you don’t generally see movies and TV shows getting made about it. In a society where people have been made to depend on money for survival, limiting or cutting off their access to it is the same as any other violent attack upon their personal sovereignty, and can easily be just as destructive. But as a society we haven’t yet learned to see and understand this violence, so it doesn’t attract interest and attention. That lack of interest and attention enables the empire to launch deadly campaigns targeting civilian populations unnoticed, without any public accountability.

What does is say about MSM that Fox News is the only MSM outlet to have covered the @ceprdc study showing that US sanctions have killed 40,000 Venezuelans? NYT, WaPo, MSNBC and CNN have all ignored it and promoted murderous sanctions and regime change. https://t.co/RLqfaIK166

— Dan Cohen (@dancohen3000) May 8, 2019

It’s great that more people are starting to understand the cost of war, to the extent that we’re even seeing US presidential candidates make opposing it central to their platforms, but this is happening at a time when overt warfare is becoming more obsolete and replaced with something subtler and more sinister. We must as a society evolve our understanding of what starvation sanctions are and what they do, and stop seeing them as in any way superior or preferable to overt warfare.

The fact that people generally oppose senseless military violence but are unable to see and comprehend a slow, boa constrictor-like act of slaughter via economic strangulation is why these siege warfare tactics have become the weapon of choice for the US-centralized empire. It is a more gradual way of murdering people than overt warfare, but when you control all the resources and have an underlying power structure which maintains itself amid the comings and goings of your officially elected government, you’re in no hurry. The absence of any public accountability makes the need for patience a very worthwhile trade-off.

So you see this siege warfare strategy employed everywhere by the US-centralized empire:

• You see it with Iran and Venezuela.

• You see it in Yemen, where in addition to deadly blockades the Saudis have been deliberate targeting farms, fishing boats, marketplaces, food storage sites and cholera treatment centers with US-assisted airstrikes.

• You see it in North Korea, where boats full of dead people have been washing up on Japan’s shores because fishermen get stuck out at sea trying to catch food since they can’t afford enough fuel to get back to shore, which former Secretary of State Rex Tillerson attributed to US sanctions.

• You see it in Gaza, where people are being deprived of an adequate amount of nutrients due to an Israeli blockade designed to “put the Palestinians on a diet”.

• You saw it with Julian Assange, where Ecuador collaborated with the US to slowly make life in the embassy more and more hellish in the hope that he’d step outside to be arrested by British police.

• You’re seeing it now with Chelsea Manning, who is currently racking up $500 a day fines for her principled stand against a corrupt grand jury proceeding against Assange, fines which will double next month to $1,000 a day.

The US-centralized power alliance is so powerful in its ability to hurt nations with financial influence that in 1990 when Yemen voted against a UN Security Council Resolution authorizing the attack against Iran, a senior US diplomat was caught on a hot mic telling the Yemeni ambassador, “That will be the most expensive ‘no’ vote you ever cast.” According to German author Thomas Pogge, “The US stopped $70 million in aid to Yemen; other Western countries, the IMF, and World Bank followed suit. Saudi Arabia expelled some 800,000 Yemeni workers, many of whom had lived there for years and were sending urgently needed money to their families.”

That’s real power. Not the ability to destroy a nation with bombs and missiles, but the ability to destroy it without firing a shot.

It’s no wonder, then, that the drivers of this empire work so hard to continue growing and expanding it. The oligarchs and their allies in opaque government agencies no doubt envision a world where all noncompliant nations like Iran, Russia and China have been absorbed into the blob of empire and war becomes obsolete, not because anyone has become any less violent, but because their economic control will be so complete that they can obliterate entire populations just by cutting them off from the world economy whenever any of them become disobedient.

This is the only reason Iran is being targeted right now. That’s why you’ll never hear a factually and logically sound argument defending Trump’s withdrawal from the nuclear deal; there is none. There was no problem with the JCPOA other than the fact that it barred America from inflicting economic warfare upon Iran, which it needed for the purpose of toppling the nation’s government so that it can be absorbed into the blob of the US-centralized empire.

And all the innocent human beings who die of starvation and disease? They don’t matter. Imperial violence only matters if there are consequences for it. The price of shoring up the total hegemony of the empire will have been worth it.

*  *  *

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via ZeroHedge News http://bit.ly/2J0CorJ Tyler Durden

By Michael Zezas, political strategist at Morgan Stanley

It’s now confirmed that Presidents Trump and Xi are set to meet at the G20 later this week. And while US administration officials have said we shouldn’t expect a deal but rather a path forward for negotiations, this is still welcome news to anyone looking for relief from the tit-for-tat tariff escalation between the US and China. Communication may not be sufficient to break the escalatory cycle, but it’s a necessary condition. And it’s timely, too, as the US authorization to levy tariffs on a further ~US$300 billion of imports from China takes effect in early July. So as we enter this week, there seems good reason to expect that the G20 will result in a tariff ‘pause’, affording both sides a defined period of time to get negotiations back on track before resorting to further tariff escalation.

But investors beware: while a pause is better than escalation, it won’t refresh the economy enough to forestall a challenging path for risk assets. A pause, particularly one that comes without preconditions and follows a period of heated rhetoric, would be positive, signalling that both sides want to avoid further economic damage. If it coincides with Fed dovishness, a pause could boost investor sentiment and risk asset prices in the short term. However, we’d view this more as a set-up to sell risk than a catalyst to turn more bullish. Consider the following:

1. Market or economic weakness might be needed to avoid further tariffs and make the pause permanent: Just because the US and China may agree to put more negotiating time on the clock doesn’t mean they’ve made any progress on the points that divide them: codifying IP protections, when to remove existing tariffs, and how much to reduce the trade deficit via asset purchases. These gaps will be difficult to bridge, in our view. As we’ve argued previously in the Sunday Start, we think that game theory is a useful framework to gauge how this could play out. These differences are incentives for each side to escalate. We expect that market or economic weakness would clarify the benefits of de-escalation and lead to a deal, but this may not give investors much comfort.
2. A pause doesn’t fix the ongoing pressure from the ‘downside of fiscal stimulus’: Tariffs are not the sole policy challenge to markets, but rather an accelerant of the risks created by a US policy choice made in 2017: to apply fiscal stimulus through tax cuts when the economy was already in good shape. Back then, we posed this question: though tax reform could prove beneficial over the long term, what did US$1.5 trillion of tax cuts do for the current economic cycle? To us, it’s been more ‘happy hour in America’ than ‘morning in America’. Stimulus in good economic times generally has a lower multiplier effect, and expiring provisions in the tax cuts are already pushing effective corporate tax rates higher and creating pro-cyclical incentives. Not surprisingly, our latest Morgan Stanley Business Conditions Index registered a precipitous drop, reflecting declines in hiring, hiring plans, and capital spending plans among US companies.
   
   Said more simply, the best impacts of the tax cuts to economic growth and corporate profitability were short-lived, are now likely behind us, and may be putting pressure on profit margins and the economic cycle. Avoiding further tariffs won’t change this dynamic.
3. Tariffs have already impacted the global economy: PMIs had been moving lower since the beginning of 2018, driven mainly by trade tensions. The latest deterioration in manufacturing PMIs reflects a further hit to corporate confidence, with the declines most pronounced in the US, China and Korea. Trade tensions were frequently cited as a concern.

Taken together, we think that the benefits of a pause lie mainly in its ability to delay, but not resolve, downside risks to economic fundamentals. Hence, a pause would reinforce our current views: a range-bound path for the S&P, with a downward skew from current levels; a wider bias for credit spreads; and a preference for government bonds on our economists’ expectation for further Fed easing.

via ZeroHedge News http://bit.ly/2Xpj2Wr Tyler Durden