Doubt Rises As Market Liquidity Collapses

As the GOP's healthcare reform bill was pulled on Friday, the major stock indices rebounded in a fit of confusion, helped by the collapse in market liquidity to the lowest levels of 2017

However, as NorthmanTrader's Sven Henrich writes, nothing has been solved (or even addressed). Our country, whether people are willing to admit it or not, has deep structural problems that require deep thinking and broad support to solve them.

For decades both parties have presided over the emergence of these structural problems and their only solution has always been to throw more debt at it. I said it before the election and I say it again: Neither candidate and neither party has shown any willingness or capability to address any of the structural problems we face.

They market solutions to fight the symptoms, but not the root causes and in the end accomplish little.

Under Republicans and Bush we ended up with a doubling of the debt and the financial crisis in 2008. Then Democrats presided over another $10B in debt accumulation and $4 trillion in central bank balance sheet expansion with a meager rise in real wages and consumers taking on record debt while all income and wealth benefits went to the top 1% resulting in vast further increases in wealth inequality. Yes things looked better on measures such as unemployment but it was paid for with massive accumulation of debt and artificially low rates. The election of Donald Trump under the banner of populism serves as evidence of the underlying discontentment.

So now Republicans are back in charge and are claiming competence and a willingness to “fix” things. Really?  Are they really?

Take health care as an example. The promises given were outlandish, everyone will have coverage, premiums will go down, taxes will go down, Medicare will not get cut and it will be a “beautiful picture”. Sorry folks, but that was all nonsense. Aways has been and if you fell for it you got suckered again.

There is no magic bullet, there is no magic plan, there is only structural reality. And this structural reality says our demographic wave along with our for profit oriented health care system demand certain compromises.

The health care industry is interested in profits first, everything else is secondary. Health care is the field they are in, but they are in the business of profit. Hence, while the developed world has national health care systems with coverage for everyone the US does not. Never had and while Obamacare was a meager attempt at creating one it was fought in every way possible by industry lobbying groups who wanted to protect their profit margins. I get it. Covering people who are a net loss for the industry is counter to quarterly profits. Ultimately Obamacare ended up being a very flawed compromise, but it managed to get millions of uninsured to have insurance.

Indeed while the cost of health care is rising dramatically everywhere in the world it is the US were the costs of medications and treatments are more expensive than anywhere else in the world:

There are many reasons for this, but I can tell you one contributing factor is this:

Big time pig time. It used to be people entered the medical field because they actually wanted to help people in need. Some still do of course, but it’s all about the mighty buck, especially for insurance companies. What is insurance at its root? It’s to provide a coverage pool so people who are faced with an emergency don’t end up getting ruined. Now it’s about squeezing the most bucks out of people by avoiding paying out when possible and to not cover people who are at most risk. Basically making the most money while avoiding providing the services you advertise as much as possible. Swell.

The medical industry is difficult and problematic everywhere, but with its ballooned costs Americans pay much more than people with national health insurance systems and often enough can’t claim they get a lot more as a result. Americans are faced wth an obesity and drug abuse crisis (legal and illegal) and life expectancies for certain age groups are actually regressing. Americans have not gotten healthier over the past few decades yet they spend more for health care and one could certainly make the case that these trends are intertwined.

I use costs as an example and certainly the European health care system has its own issues. Demographics make it a big time challenge everywhere as it is.

But the larger point is this: The US health care insurance system is a complex mess, it’s pricey and the US being a country with a child poverty rate in excess of 20% has major issues in ensuring health care access to its citizens while professionals in the industry are enriching themselves in degrees many Europeans equivalents can only dream of. And let’s be very clear: Access does not equate coverage. In fact, the system is so skewed economically that medical reasons are the number 1 cause of bankruptcy in the Unites States. Getting ill or falling victim to a disease can financially ruin you. A horrid reality about the US health care system. And sadly, many people are perfectly ok for others to suffer that fate.

And with baby boomers retiring and getting old there is an avalanche of millions of older people requiring treatment and care for years to come further straining a system that is already vastly underfunded.

And so, in context, what the new administration actually proposed was actually quite revealing in its intent. What was the intent? Well, precisely the opposite of the promises made. Premiums would go up big time for older people especially, Medicare would get cut by $880B, up to 24 million could lose insurance altogether and the notion of tax credits to use for people who have hardly any income is an intellectual insult. If you make only $20-25K a year (if that) you wouldn’t even have enough taxable income to make use of the tax credit. It’s all BS. That’s the clear message. There are many articles on all this and the CBO analyzed the consequences of the bill proposal, but the gap between the promises made and the details offered instead is pretty glaringly wide.

Was what was proposed better than what existed before? I took a shot at the answer here.

Who would have benefitted? The insurance industry and of course the 1% who will see the most tax benefits from the reversion of Obamacare related taxes. Populism at its finest. Yet even this was not enough for certain forces in the Republican party.

And so this first attempt at major legislation by the new administration failed miserably. But this failure highlighted some important realities:

Republicans were not going to make it better for you, the citizen. And Americans realized this and hence they rejected it and consequently it created a big divide among Republicans. See, despite all the hate you see on the internet Americans are not stupid and they saw this health care bill was going to shaft them and they made their discontentment heard.

And now the pressure to produce results will grow exponentially. After all the mid terms are coming next year and the survival instinct will start taking over.

Health care was the first big promise and it produced nothing and it was not going to structurally improve anything. If anything it would’ve widened the wealth gap furthering its current form.

Now you’ll hear a lot about tax cuts to come. It’s the new QE carrot that’s dangled in front of everybody.

I have no idea how this will turn out, but know that before tax cuts can even be agreed upon there’s this little issue about the debt ceiling and an actual budget with revenue projections and actual cuts that need to be hashed out.

Currently the Treasury department keeps spending cash to keep the debt ceiling flat, but the Treasury department will run out of cash and Treasury Secretary Mnuchin is already on the record saying that it needs to be increased.

His boss had some things to say about that very topic just a few years ago:

If you haven’t noticed by now there is an ever widening gap between rhetoric and reality. It’s easy to make promises:

It’s much harder to keep them, and the tweet above went after the core question raised in this post: Doubt.

I don’t know when and how people will realize that the promises where indeed empty, but everything so far, from health care, tax cuts, etc. is all geared to even further widen the wealth gap that already exists and continues to widen. People have piled a lot of money into expensive stocks based on certain promises made including 4% GDP growth and “massive” tax cuts. I continue to believe that once reality sinks in people may develop second thoughts and doubt and there will be a lot of money trapped at very high P/E levels that will seek to get out.

I repeat: Neither party has shown a willingness or capability to address the big structural realities we face as a country. And to be fair the problems may only be solvable via massive realignment. But as long as low interest rates, courtesy of the Fed, are permitted to sustain artificial high debt loads both parties are able to get away with accomplishing little on the structural front.

Ultimately the math will force their hands. And doubt, while not yet clearly present in equity markets, is already very much present in the polling:

My premise: You can’t pass any broad based legislation benefitting the top 1% with this lack of broad based support. If anything, you need to be bold and reach across the isle in a big way to create policies that benefit the many and not the few.

Yet I see zero evidence in the current political climate for any of this to happen or ever happening.

Instead all we see is drama of some sort every single day. I don’t need to point it out, you know what I am talking about. But drama can serve a purpose. As long as everyone is engaged in talking about drama there is no time or need to talk about substance and real solutions. And hence drama becomes method. And ever more drama is needed to keep folks distracted from non existent substance. So I fully expect more of it to come.a

In the Final Wave I described the latest charting evidence for why we believe we are in the final phase of the bull market. As I said at the beginning: Our country has deep structural problems that require deep thinking. Does anybody see evidence of deep thinking anywhere? Or even a debate on how to address them? Can a country solve its structural problems without an objective debate and well designed solutions to solve them?

I doubt it.

via Tyler Durden

This Is The Nightmare Scenario For The GOP: A $2 Trillion Funding “Hole”

When one strips away the partisan rhetoric and posturing, the practical impact of Friday’s GOP failure to repeal Obamacare has a specific monetary impact: approximately $1 trillion.

Since the ObamaCare repeal bill would have eliminated most of the 2010 health law’s taxes, this would have lowered by a similar amount the revenue baseline for tax reform. Essentially, with the ObamaCare taxes gone, it would have been easier to pay for lowering tax rates. Now, if Republicans want to eliminate the ObamaCare taxes as part of tax reform and ensure the bill does not add to the deficit – which they need to do to assure Trump’s reform process continues under Reconciliation, avoiding the need for 60 votes in the Senate – they will have to raise almost $1 trillion in revenue.

In other words that – all else equal – is how much less tax cuts Trumps and the republicans will be able to pursue unless of course they somehow find a source of $1 trillion in tax revenue (or otherwise simply add to the budget deficit) to offset the Obamacare overhang.

Considering Paul Ryan’s statement on Friday, it appears that at least for the time being, Republicans would leave the ObamaCare taxes in place.  “That just means the ObamaCare taxes stay with ObamaCare,” he said. “We’re going to go fix the rest of the tax code.”

Ryan also pushed back on the idea that the setback on healthcare previews difficulties with other items on the legislative agenda  “I don’t think this is prologue to other future things, because members realize there are other parts of our agenda that people have even more agreement on what to achieve,” he said. “We have even more agreement on the need and the nature of tax reform, on funding the government, on rebuilding the military, on securing the border.”

While the failure to pass the healthcare bill makes tax reform harder, “it does not in any way make it impossible,” Ryan said. “We will proceed with tax reform, we will continue with tax reform.” Earlier in the week, Treasury Secretary Steven Mnuchin said that the administration has been working on tax reform for two months and plans to release a plan in the near future. House Ways and Means Committee Chairman Kevin Brady added in a statement that Republicans on his panel “are moving full speed ahead with President Trump on the first pro-growth tax reform in a generation.”

Still, quick action on legislation is unlikely; in fact while the market narrative changed on a dime last Friday, with traders now convincing themselves the delay of Obamacare means tax reform passes quicker, this is not the case. As Larry Lindsey, a former economic adviser for George W. Bush, told CNBC’s “Power Lunch” last Friday, one of the “silliest” things he’s heard from people is that the health-care proposal not passing will be good for Trump’s tax reform. “Absolutely not,” he added.

A replacement for Obamacare “was necessary for budgetary reasons, for tax reform, because it was a revenue gainer,” said Lindsey. Trump’s goals for economic growth should also be questioned now, he warned.

“They might move on to [tax reform] next, but when you have a president who can’t deliver his own caucus, then the president’s position will be weakened on all issues,” Lindsey said. “If you’re in Congress and you don’t like something, you now have an example of how you can ‘roll’ the president.”

* * *

But wait, there’s more.

While the GOP will be hard pressed to find $1 trilion in offsetting savings or revenues, their headaches could be doubled if the proposed border adjustment tax fails to pass next. As a reminder, BAT is expected to generate as much as $1.18 trillion in offsetting revenues; should BAT no be DOA, that’s another $1.2 trillion in potential government revenues that is gone. 

According to James Pethokoukis of the American Enterprise Institute of Economic Policy, the fact that the Republicans failed to pass a health-care reform bill makes the odds that they will pass a border adjustment provision much smaller, and “the odds of getting a bigger stimulus plan will drop, too”, he told CNBC on Friday. Investors “won’t get to see cuts to a 15 to 20 percent tax rate” in corporate and marginal tax rates such as those Trump has proposed, Pethokoukis added. Instead, it will likely be closer to what Obama worked toward — something closer to a 30 percent tax rate, he said. It raised the specter of more discontent among Trump’s longtime supporters, considering he campaigned on that specific promise.

Echoing this sentiment, Jared Bernstein, a senior fellow from the Center on Budget and Policy Priorities, said in an interview that tax reform and the health-care proposal were “intimately connected for precise reasons. Trump once suggested achieving growth of 2 to 4 percent, but this might look more like 1 to 2 percent now because of budgetary constraints, he added. Now, the government has less money available to hit “high revenue targets,” Bernstein said.

Summarizing the above, as a result of Friday’s failure, the tax revenue “hole” Republicans have to fill now is at least $1 trillion bigger, and perhaps as large as $2.2 trillion.

* * *

But wait, there’s even more.

As the WSJ writes overnight, in theory rewriting the tax code could be easier than revamping the whole health-care industry. Republicans pride themselves on ideological unity in favor of lower tax rates. And the stakes appear lower for Americans — paperwork and money are far different than matters of life and death. “Tax reform is less visceral,” said Rep. David Schweikert (R., Ariz.) “I can pull up a calculator and say ‘it’s this or this’…it’s hard legislating to anecdotes and stories.”

But scratch deeper, and the GOP quest for a full overhaul of the tax code is fraught with squabbles, procedural hurdles and difficult trade-offs. The party’s failure on health care – after having seven years to prepare – shows how hard it is for Republicans to write complex legislation that attracts support from their moderate and conservative wings. “It’s just a reminder of how incredibly hard transformational legislation is,” said John Gimigliano, a former GOP congressional tax aide now at KPMG LLP.

As the WSJ adds, to succeed, Republicans need to bridge at least three big gaps.

  • First, they need to balance competing desires to cut tax rates sharply and to slow the rise of national debt. Republican leaders in Congress say they want a revenue-neutral plan – one that brings in about as much money as today’s tax system. Faster economic growth might help, but it doesn’t fully bridge the divide. To accomplish revenue neutrality while sharply lowering rates, they will attempt to whack popular tax breaks, such as business deductions of interest on debt and individual state and local tax deductions. They will meet resistance from groups that want to protect those breaks.
  • Second, they have to reconcile alternate visions of what they are setting out to accomplish and who will benefit. Mr. Trump has said his priority is middle-class tax cuts for individuals. “Not the top 1%,” said Mr. Mnuchin. House Speaker Paul Ryan (R., Wis.) and Ways and Means Chairman Kevin Brady (R., Texas) want an overhaul primarily focused on promoting economic growth, even if that means tax cuts that favor the very top of the income scale.
  • The plans they all campaigned on are tilted to the top, according to independent analyses. Third, the party is at odds over the Ryan-Brady plan for border adjustment – taxing imports and exempting exports. The Trump administration has been ambivalent and sometimes critical of the idea. Senate Republicans are outright cold to it. Messrs. Ryan and Brady say it’s crucial because it provides about $1 trillion to offset corporate-tax-rate cuts and it discourages companies from shifting profits abroad.

None of those divisions inside the GOP have been resolved yet, and dozens more are lurking, including debates over tax breaks for renewable energy, credits that aid low-income households, and the treatment of carried interest income for private-equity managers.

“The notion that tax is easier than health is not borne out by the facts, ” a Senate GOP aide told the WSJ. “Having discussed health care for seven years, Republicans were 75% in agreement on the policy. On tax, none of the foundational questions have been answered.”

In short, the market is about to be significantly – perhaps “tremendously” – disappointed once again, and quite soon.

via Tyler Durden

Fresh Off an Apology to Comet Ping Pong, Alex Jones Promises ‘Biggest Pizzagate Revelations’ Yet

I suppose he was using the public apology as a honeypot to lure normies into this realm, only to later redpill them on John Podesta’s affinity for walnut sauce.

Jone is promising to bring the fire at 4:00ct. Or, he’s just meming around — attention whoring — in order to sell some water filters to the masses.

Either way, IT’S HAPPENING.

Content originally generated at


via The_Real_Fly

“If They Want To Blow It Up, They Can” – How Republicans Can Hobble Healthcare Without Repeal

Following President Trump's clarifying tweet yesterday that "Obamacare will explode" on its own…

It is becoming increasingly clear that, even without the 'repeal', the Trump administration has already begun using its regulatory authority to water down less prominent aspects of Obamacare.

The Republicans' failure to repeal Obamacare, at least for now, means it remains federal law. But as Reuters reports, newly confirmed Health and Human Services Secretary Tom Price's power resides in how to interpret that law, and which programs to emphasize and fund. Earlier this week, Price stalled the rollout of mandatory Medicare payment reform programs for heart attack treatment, bypass surgery and joint replacements finalized by the Obama administration in December.

Hospitals and physician groups have been counting on support from Medicare – the federal insurance program for the elderly and disabled – to continue driving payment reform policies built into Obamacare that reward doctors and hospitals for providing high quality care at a lower cost. The Obama Administration had committed to shifting half of all Medicare payments to these alternative payment models by 2018. Although he has voiced general support for innovative payment programs, Price has been a loud critic of mandatory federal programs that dictate how doctors should deliver healthcare.


Without the backing of Medicare, the biggest payer in the U.S. healthcare system which Price now oversees, the nascent payment reform movement could lose momentum, sidelining a transformation many experts believe is vital to reining in runaway U.S. healthcare spending. Price "can't change the legislation, but of course he's supposed to implement it. He could impact it," said John Rother, chief executive of the National Coalition on Health Care, a broad alliance of healthcare stakeholders that has been lobbying the new administration for support of value-based care.


The move Friday to pull the Republican bill only reinforces the risk to the existing law.

"It seems that the Trump Administration now faces a choice whether to actively undermine the ACA or reshape it administratively," Larry Levitt, senior vice president at Kaiser Family Foundation, wrote on Twitter.

As a painful reminder, the United States spends $3 trillion a year on healthcare – more by far than 10 other wealthy countries – yet has the lowest life expectancy and the highest infant mortality rate, according to a 2013 Commonwealth Fund report.

Health costs have soared thanks in part to the traditional way doctors and hospitals get paid, namely by receiving a fee for each service they provide. So the more advanced imaging tests a doctor orders or pricey procedures they perform, the more money he or she makes, regardless of whether the patient's health improves.

"We have a completely broken economy in healthcare," said Blair Childs, senior vice president at hospital purchasing group Premier Inc. "Literally, all of the incentives in fee-for-service are for higher cost."

As Reuters concludes, President Trump has already signed an executive order directing the HHS to begin unraveling Obamacare. In the early hours of his presidency, Trump directed government agencies to freeze regulations and take steps to weaken the healthcare law. The order directed departments to "waive, defer, grant exemptions from, or delay the implementation" of provisions that imposed fiscal burdens on states, companies or individuals. These moves were meant to minimize the costs and regulatory burdens imposed on states, private entities and individuals.

David Cutler, the Harvard health economist who helped the Obama Administration shape the ACA, said Price could do all sorts of things to undermine the law.

"If he wants to blow it up, he can," Cutler said in an email. But if they do, he added, "they alone will own the failure."

via Tyler Durden

The Evidence That Russia Hacked The DNC Is Collapsing

Authored by Justin Raimondo via,

The allegation – now accepted as incontrovertible fact by the “mainstream” media – that the Russian intelligence services hacked the Democratic National Committee (and John Podesta’s emails) in an effort to help Donald Trump get elected recently suffered a blow from which it may not recover.

Crowdstrike is the cybersecurity company hired by the DNC to determine who hacked their accounts: it took them a single day to determine the identity of the culprits – it was, they said, two groups of hackers which they named “Fancy Bear” and “Cozy Bear,” affiliated respectively with the GRU, which is Russian military intelligence, and the FSB, the Russian security service.

How did they know this?

These alleged “hacker groups” are not associated with any known individuals in any way connected to Russian intelligence: instead, they are identified by the tools they use, the times they do their dirty work, the nature of the targets, and other characteristics based on the history of past intrusions.

Yet as Jeffrey Carr and other cyberwarfare experts have pointed out, this methodology is fatally flawed. “It’s important to know that the process of attributing an attack by a cybersecurity company has nothing to do with the scientific method,” writes Carr:

“Claims of attribution aren’t testable or repeatable because the hypothesis is never proven right or wrong. Neither are claims of attribution admissible in any criminal case, so those who make the claim don’t have to abide by any rules of evidence (i.e., hearsay, relevance, admissibility).”

Likening attribution claims of hacking incidents by cybersecurity companies to intelligence assessments, Carr notes that, unlike government agencies such the CIA, these companies are never held to account for their misses:

“When it comes to cybersecurity estimates of attribution, no one holds the company that makes the claim accountable because there’s no way to prove whether the assignment of attribution is true or false unless (1) there is a criminal conviction, (2) the hacker is caught in the act, or (3) a government employee leaked the evidence.”

This lack of accountability may be changing, however, because Crowdstrike’s case for attributing the hacking of the DNC to the Russians is falling apart at the seams like a cheap sweater.

To begin with, Crowdstrike initially gauged its certainty as to the identity of the hackers with medium confidence.” However, a later development, announced in late December and touted by the Washington Post, boosted this to “high confidence.” The reason for this newfound near-certainty was their discovery that “Fancy Bear” had also infected an application used by the Ukrainian military to target separatist artillery in the Ukrainian civil war. As the Post reported:

“While CrowdStrike, which was hired by the DNC to investigate the intrusions and whose findings are described in a new report, had always suspected that one of the two hacker groups that struck the DNC was the GRU, Russia’s military intelligence agency, it had only medium confidence.


“Now, said CrowdStrike co-founder Dmitri Alperovitch, ‘we have high confidence’ it was a unit of the GRU. CrowdStrike had dubbed that unit ‘Fancy Bear.’”

Crowdstrike published an analysis that claimed a malware program supposedly unique to Fancy Bear, X-Agent, had infected a Ukrainian targeting application and, using GPS to geo-locate Ukrainian positions, had turned the application against the Ukrainians, resulting in huge losses:

“Between July and August 2014, Russian-backed forces launched some of the most-decisive attacks against Ukrainian forces, resulting in significant loss of life, weaponry and territory.


“Ukrainian artillery forces have lost over 50% of their weapons in the two years of conflict and over 80% of D-30 howitzers, the highest percentage of loss of any other artillery pieces in Ukraine’s arsenal.”

Alperovitch told the PBS News Hour that “Ukraine’s artillery men were targeted by the same hackers, that we call Fancy Bear, that targeted DNC, but this time they were targeting cell phones to try to understand their location so that the Russian artillery forces can actually target them in the open battle. It was the same variant of the same malicious code that we had seen at the DNC.”

He told NBC News that this proved the DNC hacker “wasn’t a 400-pound guy in his bed,” as Trump had opined during the first presidential debate – it was the Russians.

The only problem with this analysis is that is isn’t true. It turns out that Crowdstrike’s estimate of Ukrainian losses was based on a blog post by a pro-Russian blogger eager to tout Ukrainian losses: the Ukrainians denied it. Furthermore, the hacking attribution was based on the hackers’ use of a malware program called X-Agent, supposedly unique to Fancy Bear. Since the target was the Ukrainian military, Crowdstrike extrapolated from this that the hackers were working for the Russians.

All somewhat plausible, except for two things: To begin with, as Jeffrey Carr pointed out in December, and now others are beginning to realize, X-Agent isn’t unique to Fancy Bear. Citing the findings of ESET, another cybersecurity company, he wrote:

“Unlike Crowdstrike, ESET doesn’t assign APT28/Fancy Bear/Sednit to a Russian Intelligence Service or anyone else for a very simple reason. Once malware is deployed, it is no longer under the control of the hacker who deployed it or the developer who created it. It can be reverse-engineered, copied, modified, shared and redeployed again and again by anyone. In other words? – ?malware deployed is malware enjoyed!


“In fact, the source code for X-Agent, which was used in the DNC, Bundestag, and TV5Monde attacks, was obtained by ESET as part of their investigation!


“During our investigations, we were able to retrieve the complete Xagent source code for the Linux operating system….”


“If ESET could do it, so can others. It is both foolish and baseless to claim, as Crowdstrike does, that X-Agent is used solely by the Russian government when the source code is there for anyone to find and use at will.”

Secondly, the estimate Crowdstrike used to verify the Ukrainian losses was supposedly based on data from the respected International Institute for Strategic Studies (IISS). But now IISS is disavowing and debunking their claims:

“[T]he International Institute for Strategic Studies (IISS) told [Voice of America] that CrowdStrike erroneously used IISS data as proof of the intrusion. IISS disavowed any connection to the CrowdStrike report. Ukraine’s Ministry of Defense also has claimed combat losses and hacking never happened….


“’The CrowdStrike report uses our data, but the inferences and analysis drawn from that data belong solely to the report’s authors,” the IISS said. “The inference they make that reductions in Ukrainian D-30 artillery holdings between 2013 and 2016 were primarily the result of combat losses is not a conclusion that we have ever suggested ourselves, nor one we believe to be accurate.’


“One of the IISS researchers who produced the data said that while the think tank had dramatically lowered its estimates of Ukrainian artillery assets and howitzers in 2013, it did so as part of a ‘reassessment” and reallocation of units to airborne forces.’


“’No, we have never attributed this reduction to combat losses,” the IISS researcher said, explaining that most of the reallocation occurred prior to the two-year period that CrowdStrike cites in its report.


“’The vast majority of the reduction actually occurs … before Crimea/Donbass,’ he added, referring to the 2014 Russian invasion of Ukraine.”

The definitive “evidence” cited by Alperovitch is now effectively debunked: indeed, it was debunked by Carr late last year, but that was ignored in the media’s rush to “prove” the Russians hacked the DNC in order to further Trump’s presidential ambitions. The exposure by the Voice of America of Crowdstrike’s falsification of Ukrainian battlefield losses – the supposedly solid “proof” of attributing the hack to the GRU – is the final nail in Crowdstrike’s coffin. They didn’t bother to verify their analysis of IISS’s data with IISS – they simply took as gospel the allegations of a pro-Russian blogger. They didn’t contact the Ukrainian military, either: instead, their confirmation bias dictated that they shaped the “facts” to fit their predetermined conclusion.

Now why do you suppose that is? Why were they married so early – after a single day – to the conclusion that it was the Russians who were behind the hacking of the DNC?

Crowdstrike founder Alperovitch is a Nonresident Senior Fellow of the Atlantic Council, and head honcho of its “Cyber Statecraft Initiative” – of which his role in promoting the “Putin did it” scenario is a Exhibit A. James Carden, writing in The Nation, makes the trenchant point that “The connection between Alperovitch and the Atlantic Council has gone largely unremarked upon, but it is relevant given that the Atlantic Council – which is funded in part by the US State Department, NATO, the governments of Latvia and Lithuania, the Ukrainian World Congress, and the Ukrainian oligarch Victor Pinchuk – has been among the loudest voices calling for a new Cold War with Russia.” Adam Johnson, writing on the FAIR blog, adds to our knowledge by noting that the Council’s budget is also supplemented by “a consortium of Western corporations (Qualcomm, Coca-Cola, The Blackstone Group), including weapons manufacturers (Lockheed Martin, Raytheon, Northrop Grumman) and oil companies (ExxonMobil, Shell, Chevron, BP).”

Johnson also notes that CrowdStrike currently has a $150,000 / year, no-bid contract with the FBI for “systems analysis.”

Nice work if you can get it.

This last little tidbit gives us some insight into what is perhaps the most curious aspect of the Russian-hackers-campaign-for-Trump story: the FBI’s complete dependence on Crowdstrike’s analysis. Amazingly, the FBI did no independent forensic work on the DNC servers before Crowdstrike got its hot little hands on them: indeed, the DNC denied the FBI access to the servers, and, as far as anyone knows, the FBI never examined them. BuzzFeed quotes an anonymous “intelligence official” as saying “Crowdstrike is pretty good. There’s no reason to believe that anything they have concluded is not accurate.”

There is now.

Alperovitch is scheduled to testify before the House Intelligence Committee, and one wonders if our clueless – and technically challenged – Republican members of Congress will question him about the debunking of Crowdstrike’s rush to judgment. I tend to doubt it, since the Russia-did-it meme is now the Accepted Narrative and no dissent is permitted – to challenge it would make them “Putin apologists”! (Although maybe Trey Gowdy, the only GOPer on that panel who seems to have any brains, may surprise me.)

As I’ve been saying for months, there is no evidence that the Russians hacked the DNC: none, zilch, nada. Yet this false narrative is the entire basis of a campaign launched by the Democrats, hailed by the Trump-hating media, and fully endorsed by the FBI and the CIA, the purpose of which is to “prove” that Trump is “Putin’s puppet,” as Hillary Clinton put it. Now the investigative powers of the federal government are being deployed to confirm that the Trump campaign “colluded” with the Kremlin in an act the evidence for which is collapsing.

This whole affair is a vicious fraud. If there is any justice in this world – and there may not be – the perpetrators should be charged, tried, and jailed.

via Tyler Durden

Why The Healthcare Reform Bill Went Down In Flames

Via Global Macro Monitor,

OK, comrades, let’s check our partisanship at the door and deal with some real analysis on the health care bill that just went down in flames. Here are a few of our thoughts on why the Trump/Ryan healthcare bill to repeal and replace Obamacare went down and some economics behind it…

1)  Most important, the bill had no support throughout the country.   The latest poll released Thursday afternoon showed that only 17 percent of the country supported the plan.

The Quinnipiac University poll, released Thursday afternoon, shows fewer than one-in-five voters, 17 percent, approve of the Republican plan to replace Obamacare. The majority, 56 percent, disapprove, with slightly more than a quarter, 26 percent, undecided on the proposal.- Politico

2)  Ceteris Paribus (all other things equal) doesn’t hold in negotiations.  Almost every concession Trump/Ryan made to the hard-right Freedom Caucus resulted in a loss of moderate Republicans, such as the Tuesday Group.   The last straw seemed to be the gutting of the services provided by a typical insurance policy.

House Republicans leaders promised hard-right conservatives yet another concession on the health care bill on Wednesday, but it has already lost key support from House moderates and may seriously endanger their chances of getting the bill through the Senate. Ahead of the vote on Thursday, GOP leaders said the Senate would gut Obamacare’s Essential Health Benefits rule after the House passes the American Health Care Act.


That rule requires insurance plans to cover a basic minimum of health care services. These benefits include maternity and newborn care, pediatric care, emergency services, substance abuse treatment, and prescription drugs. Organizations representing 400,000 doctors wrote a letter to Congressional leaders earlier this year asking them to keep these requirements in a replacement of Obamacare. – Think Progress.

3) The legislation was a “corner solution.”   That is,  it only had the support of Republicans and was not a nonpartisan bill.  President Trump sounds like he has learned through this process that the country wants affordable health care for all and will reach out to Democrats on the next iteration.  This should neuter the Freedom Caucus in blocking the next bill.

4) Bad numbers.  The CBO’s estimate that 24 million would be kicked off health care and 14 million next year, in an election year, was devastating.

CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law. Most of that increase would stem from repealing the penalties associated with the individual mandate. Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.  – CBO

5)  Conservatives complained health care premiums did not come down enough.  Bingo!   There are many other reasons health insurance premiums are rising rather than just Obamacare.  Premiums were skyrocketing before Obamacare.  We know firsthand.  Second, the simple demographic dynamics of the U.S. of an aging population are a fundamental reason why insurance costs are rising.  The pool of insured is getting older and hence the higher costs.  This is the whole philosophical basis behind Medicare — older folks are priced out the insurance market and need government subsidies.

6) Bad economics.   The health care act would have had a deleterious economic impact.  The Achilles heel of the economy is the disparity in the distribution of income and wealth, probably at its worst in the nation’s history.  If you provide relief to the higher income groups, who have much lower marginal propensities to consume and tax the lower income groups through higher healthcare costs, who have higher marginal propensities to consume, economic activity is depressed.

the American Health Care Act, and the results are not pretty. An $883 billion tax cut, $274 billion of it going to the richest 2%. $880 billion stripped from Medicaid. And 24 million fewer insured individuals over the next ten years. – Forbes

That is is kind of mean, no?

7) The bill was rushed.  It should have been debated and tweaked through the normal committee process and will in the next iteration, which will need 60 votes in the Senate. Therefore a bipartisan bill.

8) The Upshot.  Aside from the Freedom Caucus, we believe the American government, Republicans, in particular,  have learned from this political disaster, the large majority of the country wants universal affordable health care and the next bill will be one to repair Obamacare.  This marks a philosophical win for President Obama.

How will the loss affect President Trump’s agenda going forward?   Not positive, but hard to assess its lasting impact.  He is definitely weakened politically, however.   Will the Freedom Caucus now feel more emboldened to block tax reform if it adds to the budget deficit?    This keeps the disastrous Border Tax Adjustment (BAT) in play, which is tantamount to the government playing Dr. Frankenstien with the U.S. economy.

We did warn last month of policy overreach by a president who lost the majority of the vote — 25K people rallies, aside.

What worries us most is the government is misinterpreting the November victory as a big mandate, which leads to policy overreach and massive pushback by the population resulting in social instability.  – GMM, February 2017

Stay tuned.

via Tyler Durden

“Much Worse Than Watergate”, Former CIA Officer Admits Trump ‘Wiretapping’ Likely True

The "political appointees" in the intelligence community knew exactly what they were surveilling for, former CIA officer Col. Tony Shaffer told Fox News, adding that the case is "much worse than Watergate by an order of magnitude."

While Trump was not physically wiretapped, with a wire into his phone, Shaffer said the "basic fundamental idea and claim is true."

"Clearly they were after gossip because it was political," Shaffer said, maintaining that the alleged wiretap had nothing to do with Russia.

Due to the simplicity required to "mask" an American's name during an incidental wiretap, Shaffer said that the leak of Gen. Michael Flynn's name was "accidental on purpose."

Even if the surveillance was done legally, Shaffer exclaimed that whoever is responsible for the "unmasking" of Americans' names and the leaking of the information are felons.

With Comey and Rogers facing "closed sessions", and Trump looking for a win, we can't help but think something substantial looms for the leakers just ahead. Of course, the biggest dilemma for exposing the leakers is the confirmation of what we already know to an even wider audience of deniers – that Snowden, Binney, et al. are 100% correct and the surveillance state's all-seeing eye is everywhere and far beyond government control. (just remember it's for your own good).

via Tyler Durden

Hedge Fund CIO: “The Market Doesn’t Care About Health Care. Poor People Care About Health Care”

From Eric Peters, CIO of One River Asset Management, here is a topical anecdote, as well as a review of the key events in the past week.

Weekend Notes

“Where’s the beef?” bellowed Biggie Too. “Health care, regulation reform, tax cuts – where’s it at?” continued the Chief Global Strategist for one of those too big to fail affairs.

“You boys were always gonna face this moment,” barked Biggie, sliding into a slow groove.

“But here’s the thing brotha. The market doesn’t care about health care – you know that. Poor people care about health care. And the market doesn’t care about poor people. No one cares about poor people.” Biggie nodded, smiled, a big golden smile.

And pulled out a roll; crisp $100 notes. “The market only cares about taxes, regulations baby. It’s all about the Benjamins.”


  • “You cannot spend all the money on drinks and women, then ask for help,” said some Dutch dude with an utterly unpronounceable name, trying on a little Trump, just to see how it feels to call it as you see it. “Dijsselbloem lost a great opportunity to be quiet,” responded Italy’s failed former prime minister Renzi. “Dijsselbloem’s European vision is evident in the union’s policies: a presumed economic, moral and even cultural superiority coming from northern countries, to the detriment of the South,” announced the Five Star Movement, memories of Berlusconi’s Bunga Bunga parties echoing off the ruins of Caligula’s castle.
  • “It’s worth bearing in mind that the UK helped restructure Germany’s post-war debts at the 1953 London conference,” said Sir Bill Cash, presiding over the EU Exit Committee, reminding Europeans of the devastation inflicted by Germany. You see, Sir Cash wants nothing of the E60bln Brexit bill. “It might be worth tactfully reminding people – not one of my strongest points – that there’s a realistic position here that we don’t really owe anything to the EU,” concluded Cash, Europe’s endless war with itself always a scratch below the surface.
  • The European Central Bank urged Brussels to toughen sanction procedures against governments who persistently fall foul of its economic rules, as over 90 per cent of its reform recommendations had been ignored by member states last year.
  • “If they weren’t ashamed, they would revive the gas chambers,” said Turkish President Erdogan, referring to the Dutch and Germans for their opposition to his revival of the Ottomon Empire. “Turks in Europe should have five children, not three, because you are the future,” ordered Erdogan, fanning the Far Right’s anti-Islam flames. And in America, the Republican majority refused to deny 24mm poor people health care. Then moved on to our only real problems, like over-regulation and complex taxation.

Week-in-Review (expressed in YoY terms):

Mon: May to trigger Article 50 on Mar 29th, German PPI +3.1% (5yr high), Macron takes lead in 1st round poll with 25.5% (Le Pen 25.0%), Comey testifies on Russia links to Trump (discredits Trump claims of Obama wiretapping and other conspiracy theories), S&P -0.2%; Tue: Japan sovereign CDS hits 2008 lows (45bps), RBA warns of housing market froth, Macron performs well in debate (Le Pen shows poorly), UK CPI +2.3% (3.5yr high), UK home prices +6.2%, US Q4 current account deficit -0.1 to 2.4%, fears rise that Trump running into legislative obstacles, Trump record low 37% approval rating (58% disapproval), small-cap stocks surrender 2017 gains, S&P -1.2% (largest fall since Oct); Wed: Chinese banks ordered to rein in home loan growth (iron ore -6%), Japan exports +11.7% (+28.2% to China, +0.4% to US) imports +1.2%, UK terror attack (4 dead), EU current account surplus 15mth low, US oil stocks jump (imports surge), existing home sales slow (limited supply, high prices), S&P +0.2%; Thur: EU banks borrow E223bln from TLTRO, UK retail sales +3.7% (online +20.7%), Fed’s Williams “3-4 rate hikes make sense in 2017,” new home sales rise most since July, unemployment claims +15k to 258k (highest since Jan), S&P -0.1%; Fri: Japan PMI -0.7 to 52.6, Egypt’s Hosni Mubarak released, Russia cuts 25bps to 9.75% (1st cut in 7mths), EU PMIs hit 6yr high, Le Pen meets Putin and says “Russia will not interfere in French elections,” Pope Francis urges Europe to “show solidarity” as the antidote to populism, Portuguese budget deficit 40yr low of 2.1%, US drillers wkly rig count +21 to 652 (vs 372 last March), US M&A deals -21% vs Feb 2016, Trump approves Keystone pipeline, Republicans abandon healthcare vote (Trump moves on to tax reform), VIX index jumps to 2017 high of 14.16 (settled 12.96), Mnuchin “Tax reform much simpler than healthcare,” durable goods orders rise, S&P -0.1%; Sat: 60th anniversary for the EU.

Weekly Close:

S&P 500 -1.4% and VIX +1.68 at +12.96. Nikkei -1.3%, Shanghai +1.0%, Euro Stoxx -0.5%, Bovespa -0.6%, MSCI World -1.0%, and MSCI Emerging +0.2%. USD rose +1.0% vs Australia, +0.6% vs Brazil, and +0.2% vs Canada. USD fell -1.6% vs Mexico, -1.3% vs Yen, -0.8% vs Turkey, -0.7% vs Sterling, -0.6% vs Euro, -0.5% vs Russia, -0.3% vs China, -0.3% vs Chile, -0.1% vs Indonesia, and -0.1% vs India. Gold +1.3%, Silver +2.0%, Oil -2.3%, Copper -1.8%, Iron Ore -7.9%, Corn -3.3%. 5y5y inflation swaps (EU -3bps at 1.65%, US -2bps at 2.39%, JP flat at 0.49%, and UK +8bps at 3.51%). 2yr Notes -6bps at 1.26% and 10yr Notes -9bps at 2.42%.

YTD Equity Indexes:

Poland +20.9% priced in US dollars (+14.1% priced in zloty), Argentina +18.9% in dollars (+16.5% in pesos), Mexico +18.1% (+7.5%), Chile +16.5% (+14.7%), Korea +15.9% (+7.0%), India +15.6% (+11.3%), Taiwan +14.3% (+7.0%), Spain +12.9% (+10.2%), Singapore +12.9% (+9.1%), Turkey +12.9% (+15.7%), South Africa +12.3% (+1.7%), Austria +10.7% (+8.1%), Brazil +10.7% (+6.0%), HK +10.5% (+10.7%), Czech Republic +9.2% (+6.6%), Netherlands +8.4% (+5.9%), NASDAQ +8.3% (+8.3%), Malaysia +7.8% (+6.3%), Germany +7.6% (+5.1%), Switzerland +7.6% (+4.8%), Italy +7.5% (+5.0%), Sweden +7.4% (+4.1%), Australia +7.2% (+1.5%), Euro Stoxx 50 +7.2% (+4.7%), Indonesia +6.9% (+5.1%), Belgium +6.4% (+3.9%), China +6.2% (+5.3%), Japan +6.0% (+0.8%), Thailand +5.9% (+2.0%), France +5.8% (+3.3%), Finland +5.0% (+2.5%), Philippines +4.9% (+6.3%), Denmark +4.7% (+2.3%), S&P 500 +4.7% (+4.7%), New Zealand +4.1% (+2.8%), UK +4.0% (+2.7%), Israel +4.0% (-1.3%), Ireland +3.9% (+1.5%), Portugal +3.9% (+1.4%), Colombia +3.3% (-0.4%), Hungary +2.4% (+0.3%), Norway +2.4% (+0.8%), Canada +1.6% (+1.0%), Greece +1.2% (-1.2%), Russell -0.2% (-0.2%), UAE -1.1% (-1.1%), Russia -1.9% (-8.6%), and Saudi Arabia -4.5% (-4.6%).

via Tyler Durden

Caught On Tape: Trump Rally Turns Violent After Provocations From ‘Counter-Protesters’

Roughly two thousand Trump supporters showed up in Huntington Beach, California yesterday to show their continued support for President Trump in the wake of what was unarguably a really bad week for his nascent administration.  Of course, it didn’t take long for the opposition snowflakes to show up to provoke fights in hopes to progress the narrative that Trump supporters are just a bunch of hateful racists.

One of the scuffles was caught on film here:


As Reuters points out, the fights broke out after just a dozen or so ‘counter-protesters’ attempted to block the Trump rally’s progression.  In all, at least 4 snowflakes were arrested for illegal use of pepper spray and one for assault and battery…but the Trump supporters are the ‘violent’ ones, right?

Multiple fights broke out and at least one Trump supporter was doused with pepper spray when pro-Trump demonstrators marching along Bolsa Chica State Beach encountered a small group opposed to the Republican president who had gathered to denounce the rally.


Four counter-protesters were arrested, three for illegal use of pepper spray and one for assault and battery, Kevin Pearsall, a spokesman for the California State Parks Police said on Saturday evening.


The fights appeared to start in the early afternoon when around a dozen anti-Trump protesters dressed in all black refused to move from a bike path to allow a larger group of pro-Trump supporters taking part in the Make America Great Again rally to pass. The confrontation escalated into a fight with more skirmishes quickly breaking out.


At least one person was pepper-sprayed by an anti-Trump protester, Pearsall said. Park police estimated that 2,000 Trump supporters flocked to the stretch of coastline located south of the ocean-side community of Huntington Beach. Around 20 counter-protesters attended, Pearsall said.

Of course, absent the provoked drama, the rally was intended to be a peaceful march along the California beach.


Meanwhile, supporters got a shout out tweet from President Trump for their efforts.

via Tyler Durden

Buckle Up, the Bank of Japan Has Blown Up the Markets (Again)

If you have been long US stocks since Election night, you have been a Yen bear and nothing else.

Last September the Bank of Japan announced a new policy of targeting a 0% yield on its 10-Year Japanese Government Bonds. Many in the investment community took this to represent a “tightening” of policy.

It was no such thing.

Targeting a 0% rate on 10-Year JGBs opens the door to unlimited currency devaluation as the Bank of Japan prints Yen to buy JGBs.

Note the collapse of the Yen that followed this announcement.

This policy was implemented strictly to devalue the Yen which had been appreciating rapidly due to the BoJ’s policy mistake of implementing NIRP earlier in 2016 (NIRP is highly deflationary as both the BoJ and ECB have discovered).

Since this time, the Yen has been the single largest driving force for the markets, as Gold and Bonds sold off and the $USD and US stocks rallied based on the BoJ’s interventions.

Yen Down=Bonds and Gold down.

Yen down= US stocks up.

If you were trading in any of these assets since September 2016, you were effectively trading the Yen and nothing else.

But this period has ended.

The $USD/Yen pair has taken out critical support. The Yen carry trade has begun to blow up. Yes we will have bounces here and there (like the one late last week) but this trend is OVER.

And stocks are about to play “catch up.”

On that note, we are already preparing our clients for a sharp correction. Market "rigs" such as this never end well.

We just pu

In it, our  Stock Market Crash Survival Guide we detail how the coming drop will unfold…which investments will perform best… and how to take out "market insurance" trades that will pay out substantial returns when the inevitable hits.

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Phoenix Capital Research



via Phoenix Capital Research