California “Camp Fire” Deadliest, Most Destructive In State History As Death Toll Hits 42

Northern California’s Camp Fire burning near Chico is not only the state’s most destructive, it is also California’s deadliest in state history. A total of 42 people have died in the blaze – one of two major wildfires burning throughout California with a combined death toll of 44. 

The Camp Fire’s death toll has grown in staggering leaps. The first notice came on Thursday, when investigators found the remains of five people in Paradise who were apparently trapped in their cars by the blaze. Four more were found on Friday, and 20 more over the weekend. –NPR

The Camp Fire in Butte County about 80 miles north of Sacramento grew to 125,000 acres overnight, up from 117,000, and has destroyed over 6,500 structures. It is just 30% contained

Source: Sentinel-2 satellite

“This is an unprecedented event,” said Butte County Sheriff Kory Honea on Monday night. “If you’ve been up there, you also know the magnitude of the scene we’re dealing with. I want to recover as many remains as we possibly can, as soon as we can. Because I know the toll it takes on loved ones.” 

President Trump has approved an expedited disaster declaration request for the California fires, stating in a tweet that he wanted “to respond quickly in order to alleviate some of the incredible suffering going on,” adding “I am with you all the way. God Bless all of the victims and families affected.”

The Camp Fire started last Thursday morning, storming through Paradise CA and leaving utter devastation in its wake.  

“Last night firefighters continued to hold established containment lines,” CalFire said in a Tuesday update, adding that firefighters had “worked aggressively” to safeguard structures in harms way. That said, dry conditions and steep terrain are expected to continue to pose a challenge. 

More than 50,000 people have fled the Camp blaze, according to member station KQED. And even at a distance, the fire is posing health concerns: “Air quality throughout the Bay Area remains in the ‘unhealthy’ zone, according to federal measurements,” KQED reports, adding that the conditions should persist through Friday. –NPR

Meanwhile, the Woolsey Fire in the Southern California Malibu region has destroyed over 95,000 acres, destroyed 435 structures and claimed 2 lives. It is 35% contained. 

An air tanker drops water on a fire along the Ronald Reagan Freeway in Simi Valley, Calif.
Ringo H.W. Chiu/AP

“We’ve got 60 to 70 mph offshore Santa Ana winds blowing for the next several days and those are just deadly,” said CalFire Chief Ken Pimlott to NPR

Molten aluminum flowed from a car that burned in front of one of at least 20 homes destroyed just on Windermere Drive in the Point Dume area of Malibu, California, Saturday, Nov. 10, 2018.Reed Saxon / AP

The cause of the fires remain unknown, however two electric utility companies reported service issues just minutes before the two blazes began. 

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Why Stan Lee’s Flaws Were Part of His Virtues

Stan Lee, who died yesterday at age 95, is a topic that attracts obsessive nerds. Nerdery inspires a hunger to have a deeper, more complicated opinion than the standard one non-obsessives might have. In Lee’s case that normal opinion is probably best expressed as “Stan Lee was awesome, the prime driving force of the wonderful Marvel Comics universe, which has understandably brought joy to millions in comic books and now in our most popular motion pictures.”

When I was first began obsessively consuming Marvel Comics in 1975, Lee was already a half-decade past writing most of them; still, his spirit dominated them. Each comic the company issued featured a “Stan Lee Presents” logo on the splash page and his monthly “Stan’s Soapbox” columns. Stylish hardcover books, as well as monthly titles from Marvel, were reprinting his 1960s work that established the intricately interconnected Marvel superhero universe. That sense of intertwined continuity has spread, as his youthful devotees took over popular storytelling everywhere, through entire multiverses of adventure movies to most quality TV shows that strive to do more than tell disconnected weekly stories of someone solving a problem.

But smart comics cognoscenti grew to a second-level realization: that loving and crediting Lee uncritically was untrue to how Marvel Comics were actually created. To boot, venerating Lee without proper caveats was unfair to some truly creative artists. It was his artist partners Jack Kirby (the Fantastic Four and Thor most prominently and continuously) and Steve Ditko (Spider-Man, Dr. Strange) who most deserve credit for the wildest and most wonderful imaginings of Marvel, given how Lee as writer/editor (and company employee while his artists were freelancers) didn’t provide full scripts, at most talking through story ideas with artists then taking their spectacular drawn pages that laid out the action and writing dialogue on them.

What’s more, Lee’s lifelong role as an employee or at least paid-off emissary of Marvel made him regularly refuse to fully and specifically credit his artist partners as true co-creators of the characters. (Books will surely be written, as many magazine articles have, on the specifics of Lee’s relationship with the artists, the company, and the truth, but the preceding are the broad basics of the comics fan arguments.) Ownership of the characters, whomever truly created them, remained with the corporation and its owners, who are now Disney, never Lee or the artists. But to add injury to insult, as many Marvel fans saw it, Lee’s continuing role with Marvel and as producer on the films made him far more money from his role as writer/editor than Kirby or Ditko ever saw.

A third-level clever take on Lee and his achievements, and those of his artist partners, is that, well, isn’t it just embarrassing that so many adults in our culture have held on to affection for and obsession with these goofy preteen fantasies of impossible superbeings? Sure, learned critics, academics, and journalists have churned out decades of smartypants theses arguing Marvel Comics’ relevance to the fears of the atomic age or their supposed mythic or Shakespearean echoes, but isn’t that all just excuse-making for childhood toys we’ve been too indulgent to put away in the closet where they belong? (The continued affection of “serious” people for Marvel Comics has been expressed everywhere this week, though I confess to feeling at times that unlovely frisson of the nerd wanting to challenge interlopers with “Oh, you love Stan Lee, huh? Then please explain Mike Murdock to me, buddy.” But it is true even in the ’60s that many hundreds of thousands from ages six to at least 26 were reading his comics, and via reprints and the movies, now tens of millions have had a chance to become true fans.)

Reed Richards, universe-exploring leader of the Fantastic Four, is pictured in the panel to the right, as drawn by Kirby. In that panel his Lee-scripted soliloquy delivers a heavy dose of the fascination and grandeur of grappling with life itself that made Lee’s comics so influential on so many who read them. He also says a few things that inadvertently frame the real way to consider Lee’s career: “There will be others…those who come after me…and each of us, in his own way, does what he can for those who will follow.”

So sure, If you wanted to minimize Lee’s importance even in terms of the huge Marvel movies (those who love comics for their own sake often want to minimize them, and those contemptuous of the supposed idiocy of a culture that spends so much time and money making and watching superhero tales do so for their own reasons), you could rightly point out that beyond the sheer concepts of “Norse God superhero” or “thawed-out World War II super-soldier” or “iron-suited industrialist” or “Russian lady spy turned hero,” the characters in the Marvel films are more based on later Marvel writers or the film writers and actors themselves than specifically on how Lee wrote them; and that Lee worked, since he was a teen in the early ’40s, in a tradition and community of comic artists and writers from whom he learned and took much. It is true that Lee did not create de novo, and that the creations he had a hand in have had a rich, in some cases richer, life without him.

But the galaxy-brain level final conclusion to what to think about Stan Lee, after all the above has been justly processed, has to be: Stan Lee was awesome. His brilliant artists did not work in a creative or business vacuum. The particulars of his dialogue and characterization were absolutely key to Marvel’s coolness and success.

And no matter what the cultural adults in the room say, and without trying to staunchly defend it to such non-believers, this ostensible adult and so many, many others now pouring out love for Stan Lee prove it: Not every wonderful, affecting story has to have the depth of insight into the actualities of the human condition of a Henry James novel, or even the depth of character and cogency of concept of the best modern science fiction.

The concepts and characters and adventures of Lee and his partners at Marvel—in all their goofiness and absurdity—captured something compelling about heroism, and our sense of the core mysteries of human and cosmic existence, and besides any such hand-waving justificatory generalizations any of us might embarrassedly make, were just so damn cool, man.

Their sheer exuberant explosive existence justifies themselves, and kids and adults of all ages have been drawn into them, deep into them, for more than half a century, captivated by the concepts, the plots, the interconnections, even the specifics of his phrasing and language choice. (Face it, true believers, many Marvelites got a quarter or more of their “interesting” vocabulary straight from Lee, if truth be our destiny.)

Maybe we’re all congenital idiots here on the bus of Stan Lee fandom, but in a sense the love and fascination inspired by his work at Marvel in the ’60s are their own proof of greatness. We’ll be awestruck by the Negative Zone and gangs of mutants fighting for supremacy and evil scientists with mechanical arms and giant Nazi robots and Asgard and the Dark Dimension and all the other concepts, acted out by enduringly charming if absurd and faux-deep characters that Lee brought or helped bring us, as long as America endures.

When it comes to his relationship as a company man to the artists, above and beyond the question of ownership (which was outside his power to change), one thing comes to mind to this obsessive reader of his work and of work about him. Comics historians present a picture whose details are too complicated and huge to reduce to a singular conclusion of what kind of man or writer or boss he was.

But from the decades of detailed interviews in the amazing comics fanzine Alter Ego—run, not coincidentally, by Lee’s writing protege at Marvel, Roy Thomas—one thing that strikes me the most is that Lee was, even as the guy who hired them and assigned work to them and created with them, a dedicated and genuine student and fan of comics art. He clearly loved and valued those artists. Lee and the artists themselves were both faced with a business world that shaped the choices creators had to make in the years before the underground and indie comics revolutions made self-publishing an imaginable choice. But artists who wanted a steady paycheck and actual access to mass markets needed a company man editor to hire them to work. Their admirers may dream of a world in which that was not true, but the comics marketplace was a world that neither they nor Lee made.

And hire them is what Lee did. Lee did not treat Kirby and Ditko and his other amazing artists as well as they’d like, and the company certainly didn’t. But in a popular culture that worked via mass production and distribution, Lee should be remembered as, whatever else he was, the guy who valued these artists and gave them a chance to work, often maintaining relationships over years or decades from the ’40s on that a less caring—or less discerning of their greatness—boss would have let go. No one loves a boss in our culture, but creatives who wish to work for a steady wage need them.

Yes, Lee was a shameless self-promoter, and the public character of “Stan Lee” was one of his most enduring creations. But that is part of his magic, not something that diminishes it. Four years ago, at age 91, Lee was still attending and participating in pitch meetings at Pow! Entertainment, the company he was working with at the time. A writing partner of mine, Daniel Browning Smith, had hosted a Stan-branded TV show, Stan Lee’s Superhumans, so I ended up with Daniel getting the honor of helping pitch some feature film and TV show ideas for Lee and his company to this man who was largely responsible for forging my own sense of story and character when I was a pre-teen.

This led to the actually strangely deep pleasure of having that man, at 91, taking time to be in a meeting he could easily have left to his associates, explain to me how a feature treatment I gave him a two-minute verbal pitch for failed to properly develop a rising sense of danger and conflict through act two.

Well, I thought, had I taken more than two minutes to explain every twist and turn maybe he’d see it wasn’t that much of a bust in rising sense of danger terms, but honestly, he was likely mostly right, if not about that flaw then about others. Having someone you admire as much as him at the other side of a table doesn’t bring out the most skilled arguer anyway. Nothing came of the meeting, and it was reasonably obvious by the end of it that nothing likely would, so I let loose the annoying fanboy and as we were shaking hands goodbye told Lee that his work forged in my youth what I saw as the key elements of myself as a person and writer.

“I get blamed for everything,” he shot back, nearly before my mouth closed.

Obviously the sort of gush he fended off a dozen times a day, and I learned later his response was, of course, one of his rehearsed lines; all the better! Lee, at his age and already giving professionally and personally of his time chose in an instant to give a younger writer and fan a further gracious gift. He responded to this hoary, to him, moment with not silence or a pro forma bored “thanks” but a memorable shot of the “real Stan” or at least the real public Stan: light and jokey and quick, that writerly voice that, combined with his pseudo-mythical grandeur, made Marvel so appealing. One quick quip, one more wonderful gift of so many from Stan Lee to me.

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Major Markets Are All Flashing Warning Signs

Authored by Lance Roberts via RealInvestmentAdvice.com,

In this past weekend’s newsletter, I touched on the outcome of the mid-term elections and why it would likely not be as optimistic as the mainstream media was portraying it to be. To wit:

“It is likely little will get done as the desire to engage in conflict and positioning between parties will obliterate any chance for potential bipartisan agenda items such as infrastructure spending.

So, really, despite all of the excitement over the outcome of the mid-terms, it will likely mean little going forward. The bigger issue to focus on will be the ongoing impact of rising interest rates on major drivers of debt-driven consumption such as housing and auto sales. Combine that with a late stage economic cycle colliding with a Central Bank bent on removing accommodation and you have a potentially toxic brew for a much weaker outcome than currently expected.”

I also wrote:

“With portfolios reduced to 50% equity, we have a bit of breathing room currently to watch for what the market does next. It is EXTREMELY important the market rally next week above Wednesday’s highs or we will likely see another decline to potentially test the recent lows.”

Unfortunately, on Monday, nothing good happened. While the week is not over yet, the failure of the S&P 500 at the 50-dma now turns that previous support to important resistance. Furthermore, the failure of the market to hold the 200-dma also increases the downside risk of the market currently.

There is an important point here to be made about “bull markets” and “bear markets.”

While there is no “official” definition of what constitutes a “bull” or “bear” market, the generally accepted definition is a decline of 20% in the market.

However, since I really don’t want to subject my clients to a loss of 20% in their portfolios, I would suggest a different definition based on the “trend” of the market as a whole. As shown in the chart below:

  • If prices are generally “trending higher” then such is considered a “bull market.”

  • “bear market” is when the “trend” changes from positive to negative.

The vertical red and green lines denote the confirmation of the change in trend when all three indicators simultaneously align.

  • The price of the market moves below the long-term moving average. 

  • The long-term overbought condition is reversed (top indicator) 

  • The long-term MACD signal changes from “buy” to “sell” X

Importantly, note that just a violation of the long-term moving average is not confirmation of a change to the ongoing bull trend. Over the last decade, there were several violations of the long-term moving average which were quickly reversed by Central Bank interventions (QE2 and Operation Twist).

In late 2015, all indications of the start of a “bear market” coincided as the Federal Reserve had launched into their rate hiking campaign. However, that bear market was cut short through the injections of liquidity from the ECB’s own QE program.

Currently, with Central Banks globally beginning to reduce or extract liquidity from the financial markets, and the Federal Reserve committed to hiking rates, there seems to be no ready “backstop” for the markets currently.

However, since this is a monthly chart, we will have to wait until December 1st to update these indicators. However, if the market doesn’t begin to exhibit a more positive tone by then, all three indicators of a “bear market” will align for only the 4th time in 25-years. 

But it isn’t just the S&P 500 exhibiting these characteristics.

The S&P 400 has not only failed at a retest of the longer-term moving average but mid-caps are close to registering a “change in the trend”  as the 50-dma crosses below the 200-dma.

(Note: we have previously closed all mid-cap positions in our portfolios)

While the S&P 600 is not a close as the S&P 400 to registering a “change in trend,” it likely won’t be long before it does. The failure of small-caps at the 200-dma is confirming additional downward pressure on those companies as concerns over ongoing “tariffs” and “trade wars” are most impactful to small and mid-sized company profitability.

(Note: we have previously closed all small-cap positions in our portfolios)

The Russell 2000 is also confirming the same. The index is extremely close to registering a “change in trend” as the 50-dma approaches a cross of the 200-dma. Also, with the index failing at the 200-dma and turning lower, just as with small and mid-cap indices above, a break of recent lows will confirm a “bear market” has started in these markets.

But what is happening domestically should not be a surprise. The rest of the world markets have already confirmed bear market trends and continue to trade below their long-term moving averages. (The very definition of a bear market.) While it has been believed the U.S. can “decouple” from the rest of the world, such is not likely the case. The pressure on global markets is a reflection of a slowing global economy which will ultimately find its way back to the U.S.

(Note: we closed all international and emerging market positions in our portfolios at the beginning of this year.)

Just as a side note, China has been in a massive bear market trend since 2015 and is down nearly 50% from its previous highs.

While much of the mainstream media continues to suggest the “bull market” is alive and well, there are a tremendous number of warning signs which are suggesting that something has indeed “changed.” 

“The tailwinds that existed for the market over the last couple of years from tax cuts, to natural disasters, to support from Central Banks have now all run their course.

The backdrop of the market currently is vastly different than it was during the “taper tantrum” in 2015-2016, or during the corrections following the end of QE1 and QE2.  In those previous cases, the Federal Reserve was directly injecting liquidity and managing expectations of long-term accommodative support. Valuations had been through a fairly significant reversion, and expectations had been extinguished.

None of that support exists currently.”

The ongoing deterioration in the markets continues to confirm, as I wrote back in April, the bull market that started in 2009 has ended. However, we will likely not know for certain until we get into 2019, but therein lies the biggest problem. Waiting for verification requires a greater destruction of capital than we are willing to endure.

(Note: Just because the bull market has ended doesn’t mean it will never resume again. It is simply a transition to remove excesses from the market. Bear markets are a good thing as it creates long-term opportunities.)

We have already taken steps to reduce equity risk and will do more on rallies that fail to re-establish the previous bullish trends in the market. If I am right, the more conservative stance will protect capital in the short-term. The reduced volatility allows for a logical approach to further adjustments as the correction becomes more apparent. (The goal is not to be forced into a “panic selling” situation.)

If I am wrong, and the bull market resumes, we simply remove hedges and reallocate equity exposure.

“There is little risk, in managing risk.” 

If you have taken NO actions in your portfolio as of yet, use rallies which fail at resistance to “do something.” I have reprinted our portfolio management rules as a guide.

RIA Portfolio Management Rules

  1. Cut losers short(Reduce the risk of fundamentally poor companies.)

  2. Set goals and be actionable. (Without specific goals, trades become arbitrary and increase overall risk.)

  3. Emotionally driven decisions void the investment process.  (Buy high/sell low)

  4. Follow the trend. (80% of portfolio performance is determined by the long-term, monthly, trend. While a “rising tide lifts all boats,” the opposite is also true.)

  5. Never let a “trading opportunity” turn into a long-term investment. (Refer to rule #1. All initial purchases are “trades,” until your investment thesis is proved correct.)

  6. An investment discipline does not work if it is not followed.

  7. “Losing money” is part of the investment process. (If you are not prepared to take losses when they occur, you should not be investing.)

  8. The odds of success improve greatly when the fundamental analysis is confirmed by the technical price action. (This applies to both bull and bear markets)

  9. Never, under any circumstances, add to a losing position. (As Paul Tudor Jones once quipped: “Only losers add to losers.”)

  10. Markets are either “bullish” or “bearish.” During a “bull market” be only long or neutral. During a “bear market”be only neutral or short. (Bull and Bear markets are determined by their long-term trend as shown in the chart below.)

  11. When markets are trading at, or near, extremes do the opposite of the “herd.”

  12. Do more of what works and less of what doesn’t. (Traditional rebalancing takes money from winners and adds it to losers. Rebalance by reducing losers and adding to winners.)

  13. “Buy” and “Sell” signals are only useful if they are implemented. (Managing a portfolio without a “buy/sell” discipline is designed to fail.)

  14. Strive to be a .700 “at bat” player. (No strategy works 100% of the time. However, being consistent, controlling errors, and capitalizing on opportunity is what wins games.)

  15. Manage risk and volatility. (Controlling the variables that lead to investment mistakes is what generates returns as a byproduct.)

It should be remembered that all good things do come to an end. Sometimes, those endings can be very disastrous to long-term investing objectives. This is why focusing on “risk controls” in the short-term, and avoiding subsequent major draw-downs, the long-term returns tend to take care of themselves.

Everyone approaches money management differently.

This is just our approach and we are simply sharing it with you.

We hope you find something useful in it.

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Bezos Backlash Begins: Socialist Democrats Decry Amazon HQ2 “Burden” On NYC

Amazon has only just officially confirmed its plans to split its second headquarters between Queens (specifically the Long Island City neighborhood) and Crystal City, Virginia (a suburb situated just three miles from Washington DC). But already, one newly elected millennial Congresswoman is leading the local backlash against the e-commerce giant, which secured a staggering $1.525 billion in performance based tax incentives from the Democrat-ruled New York State.

Alexandria Ocasio-Cortez, the youngest woman ever elected to Congress, who won her seat following an upset primary victory in the spring over former House leadership member Joe Crowley, is taking a break from her desperate quest to find an affordable Washington DC apartment to stoke public anger against Amazon on behalf of the voters in her district, which includes parts of north-central Queens that are adjacent to LIC.

In a series of tweets published Wednesday, Cortez claimed that residents in her district are “outraged” by Amazon’s decision to move to NYC.

The notion that Amazon will receive hundreds of millions of dollars in tax breaks while NYC’s public infrastructure is literally crumbling before commuters’ eyes is an outrage, Ocasio said, adding that “our communities need MORE investment, not less.”

Amazon has promised to hire 25,000 people to fill well-paid positions with salaries north of $150,000. But has the company promised to hire within the community? And has it guaranteed that workers can collectively bargain? The answers to both of these rhetorical questions is, of course, no.

Displacing working-class people, a phenomenon that has already afflicted much of NYC’s outer boroughs and will almost certainly intensify with Amazon’s arrival, isn’t community development, Ocasio Cortez complained. And investing in luxury condos doesn’t equate with community development.

Corporations that don’t focus on good health care and providing affordable housing “should be met with skepticism,” Ocasio Cortez said.

Before signing off, Ocasio Cortez specified that she isn’t “picking a fight” with Amazon, but raising important questions about corporations’ responsibility to “pay their fair share.”

Shortly after her tweetstorm, several other NYC politicians jumped on the bandwagon.

To compensate New York City for the generous (or, as Ocasio would argue, overly generous) property tax incentives, Amazon has agreed to “payment in lieu of tax” plan through which it will finance “community infrastructure improvements”, including a new public school (because we all know how much Jeff Bezos cares about public school funding), workspace for artists and a tech incubator.

Amazon

The company also promised to “invest in infrastructure improvements and green spaces”, though, unless Amazon is planning to chip in for a massive upgrade of the subway, we imagine that, whatever it proposes, New Yorkers will remain deeply unimpressed.

We imagine Ocasio-Cortez’s concerns are only the beginning. Expect waves of protests and demonstrations as NYC’s vibrant community of mommy-and-daddy-supported SJWs converge on LIC to protest the company responsible for supplying most of their possessions.

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Black Security Guard Uses Gun to Prevent Violence, Cops Show Up and Kill Him

RobersonJemel Roberson was working as a security guard at Manny’s Blue Room Lounge in Robbins, Chicago, last weekend when a fight broke out. He acted heroically—using his gun to protect innocent people. Then the police killed him.

The incident transpired around 4:00 a.m., after several drunken customers were ejected from the bar. Witnesses told WGN9 that one of these people came back with a gun and started shooting. Roberson, a 26-year-old black man, was armed, and returned fire. He was able to detain the shooter by pinning him to the ground and placing his knee on the suspect’s back. But when the police arrived, they thought Roberson was the assailant, even though he was wearing a vest that said “security.”

“Everybody was screaming out, ‘Security!’ He was a security guard,” Adam Harris, a witness, told reporters. “And they still did their job, and saw a black man with a gun.”

The police shot and killed Roberson. He was the only casualty; the shooter and three other people were injured.

Midlothian Police released a statement describing the incident as follows: “A Midlothian officer encountered a subject with a gun and was involved in an officer-involved shooting. The subject the officer shot was later pronounced deceased at an area hospital.” They plan to investigate.

Roberson was the father of a nine-month-old baby. His family is pursuing a lawsuit, and has created a GoFundMe page to help with burial expenses.

This is an example of a good guy with a gun stopping a bad guy with a gun, only to be murdered by another bad guy with a gun: the state, in this case. And while we don’t yet know just how irresponsible the cops’ behavior was here, we know it resulted in an innocent man’s death—and that multiple people were warning police not to shoot.

An innocent person’s death is always tragic, but those who support the Second Amendment should be especially perturbed that responsible gun use got a man killed by cops.

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One Third Of Central Americans Want To Live In A Different Country

Authored by Julie Ray and Neli Esipova via Gallup,

The several thousand Central American asylum seekers and migrants who are slowly making their way toward the U.S. border may be unusual because of the size of their group, but their desire to come to the U.S. is not. They actually represent a relatively small fragment of a much larger group of people in their own region — and around the world — who say they would like to move to the U.S. if they could.

In Gallup’s most recent global estimate, between 2015 and 2017, 15% of the world’s adults – more than 750 million people – said they would like to move to another country permanently if they could. In Central America, this percentage is one in three (33%), or about 10 million adults.

Three percent of the world’s adults — or nearly 160 million people — say they would like to move to the U.S. This includes 16% of adults from Honduras, Nicaragua, Guatemala, El Salvador, Panama and Costa Rica, which translates into nearly 5 million people.

But unlike the caravan of Central American migrants who are currently on the move, most people who desire to migrate will never try to make their way to the U.S. Desire remains only that. Gallup typically finds that the percentage of those who have plans to move is substantially lower than the percentage who would like to move, and even fewer are actively making preparations to do so.

Central America is no different in this regard. For example, in Honduras, whose residents make up a large percentage of the migrant caravan, about half of adults (47%) say they would like to move to another country permanently if they could, but about 9% are planning to move in the next year — and 2% are actively preparing to do so.

Implications

The caravan of asylum seekers and migrants is currently weighing whether it will remain in Mexico or push on to the U.S. Those who decide to push on speaks to the risks migrants are willing to take – and also the strong draw that the U.S. continues to be for millions.

For the past decade, Gallup’s global studies have shown that the U.S., more so than any other country, has been the top desired destination for people who say they would like to move. Central Americans are no exception. People in this region who would like to move – if they could – say they would like to move to the U.S. more than any other place in the world.

However, this desire to move to the U.S. started to show signs of waning in Central America in 2017, and it seems to have persisted in a number of countries so far in 2018. This could possibly reflect changes in the climate toward migrants in the U.S. under the Trump administration — but it is still too early to tell, and Gallup will continue to monitor it.

For complete methodology and specific survey dates, please review Gallup’s Country Data Set details.

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Nomura Warns “Only The G-20 Can ‘Kick-Save’ Global Risk Sentiment Now”

While Chinese, European, and US stocks bounced this morning on renewed optimism on positive trade-talk developments between China and US, Nomura’s Charlie McElligott warns that global growth proxies continue to exhibit poor optics and fits with Chinese financing / ‘credit impulse’ data which is far worse than expected

Global growth ‘tea leaves’ still not painting a pretty picture:

  • Crude bleeds further, with both Brent and WTI -2.0% currently

  • Japanese stocks -2.1% (Nikkei was -3.5% at one point) and led lower by cyclicals—Industrials -2.7% / Energy -2.9% / Financials -3.0% / Tech -3.0% / Materials -3.2%, showing especially negative sensitivity to the Apple iPhone concerns

  • Asia EM Eq still weaker too across Taiwan, S Korea, Singapore, Malaysia and Vietnam despite EMFX marginally better

  • Chinese Industrial Metals futures continuing their horrid trajectory (negative implications for “inflation expectations”), with Nickel -12.9% over the past month; Zinc -9.3%, Deformed Bar -8.6% and Hot-Roiled Coil -10.7% over the same 1m span

The Chinese Aggregate Financing data, while expected significantly “weaker” in light of the recent push from Chinese officials to force higher lending quotas …was still a negative-shock despite the lowered-expectations, with massive “misses” across all metrics (remember too that authorities boosted the Sep headline numbers with some accounting-fun, adding ‘local bond sales’ to the overall financing tally and creating a false-optic):

  • Aggregate Financing was 728.8B Yuan in Oct vs 1.3T Yuan survey and vs 2.17T Yuan the prior month

  • New Yuan Loans were 697B Yuan vs est 904.5B survey and 1.38T the prior month

  • Broad M2 money supply increased 8.0%, down from 8.3% in Sep

Further, some headlines from China just out which may in-act disappoint Chinese Equities further upon their reopen tomorrow:

  • *CHINA WON’T USE EXCESSIVE STIMULUS TO BOOST ECONOMY: LI

  • *CHINA WON’T DEVALUE YUAN TO SUPPORT EXPORTS: LI

As Nomura’s Managing Director of Cross-Asset Strategy, McElligott suggests the key to risk-asset stabilization remains “movement” at the G20, where a best-case “detente” scenario would be a delay on the third tranche of tariffs planned to launch at the start of the new year – we would play for this with ‘wingy’ SPX Call Spreads.

“Here’s the deal,” McElligott explains: ‘tighter financial conditions’, ‘Dollar Shortage’ thesis, ‘max QT’ (between The Fed, ECB, and BoJ) and trade tariffs are all ‘biting’ at the same time

…as fundamental data is getting downgraded…

..and removal of extraordinary liquidity are overriding these occasional bursts of optimism regarding the status of U.S. / China trade relations:

  • U.S. Dollar (BBDXY) is at 18 month highs

  • U.S. real yields (5Y TIPS) at 9 year highs

  • “Max Quantitative Tightening,” with G3 Central Bank balance-sheets seeing their YoY rate-of-change contracting to outright NEGATIVE in 4Q18

  • Fading U.S. economic momentum, with the diminishing returns of the tax-cut fiscal stimulus seeing QoQ expectations for US GDP growth consecutively lower from 4Q18 through 4Q19

  • Similarly weaker global GDP growth change expectations, with Japan, Europe and China all weaker in 2018 and EU / China expected lower again in 2019, with Japan expected just ‘flat’

  • Clear reversal and breakdown LOWER in global manufacturing PMIs, with the JPM’s aggregated Global Manu PMI index now down 9 of the last 10 months

Add-in the unwind-y behavior in the very exposed Tech sector (the Apple supply-chain beat-down saw additional victims overnight, with Japan Display -9.5% and Hon Hai Precision Industry slipping to the lowest level in five years, with Dialog Semi and AMS again lower in Europe this morning), further punishing long books that are crowded into the multi-year hiding place of “Growth” and you have the makings for atrocious sentiment.

The “kick save” required right now to turn this global risk-sentiment “bleed” is something at the G20 between Trump and Xi (and as previously noted, I plan on being “out” of my current tactical SPX long by then on “disappointment risk”) – which realistically at best is a smiling handshake photo opportunity and a lower-probability delay of the third $267B wave of tariffs (per the DC consultants, a reversal on the existing first two tranches / the $253B and $113B of tariffs is highly unlikely at this juncture)

This theoretical “tariff delay” scenario at the G20 is the obvious potential catalyst for “upside” SPX trades; however, vol remains expensive and call skew unattractive

This “Equities upside” play is further challenged too as investors have pivoted bearishly in light of the negative performance-driven “de-gross,” and NOBODY wants to sell puts to buy calls—thus the only trade which makes sense is “wingy” call spreads

I plan on being OUT of my tactical SPX “outright long” which I have pushed due to the resumption of “mechanical” demand sources in the market over the past two weeks into G20, as I believe there is a greater likelihood of disappointment at the event; HOWEVER, the most attractive UPSIDE hedge / TACTICAL play then becomes the Dec7 SPX 2815 / 2855 CS for 7.40, getting you 4.4 : 1 leverage (20d 10d call spread)

* * *

Looking further out, McElligott continues to believe that in-line with his “financial conditions tightening tantrum” phase 2 end-game, risk-markets will again fade as we push into the March 2019 Fed hike, which will push policy “restrictive” alongside higher Dollar and higher real yields as economic “slowdown” forces (tighter USD-liquidity).

Sometime in 2Q19, the Nomura strategist would then expect the UST curve to STEEPEN as the market then prices-in the end of Fed normalization, where then we should expect the more “risk-off” trading environment and acceleration of “low vol / defensive / value” trades within the Equities-space at this point in the cycle.

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Why Some Capitalists Are the Worst Enemies of Capitalism: New at Reason

Sen. Bernie Sanders recently came up with a new business to attack: Amazon. Sanders said Amazon didn’t pay its workers enough and because of that, many qualified for government assistance.

At first, Amazon CEO Jeff Bezos defended his company.

That was the right thing to do, says John Stossel. He notes: “It’s not companies’ fault that some workers qualify for handouts. More people would collect them if Amazon were not hiring. By creating jobs, Bezos gives workers better choices.”

But the media rarely mention that. Instead, they bombarded Amazon with negative coverage.

So Bezos caved. He declared that all Amazon workers would now all be paid $15 an hour or more. That higher wage sounds good to most people, but Stossel point out that while the higher minimum is good for workers who have jobs now, it can shut out beginners.

But Amazon did not stop there. It has also begun lobbying for the government to force all its competitors to pay a higher minimum wage too.

Click here for full text and downloadable versions.

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The views expressed in this video are solely those of John Stossel; his independent production company, Stossel Productions; and the people he interviews. The claims and opinions set forth in the video and accompanying text are not necessarily those of Reason.

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Cable Jumps On Report EU, UK Agree On ‘Hard Border’ Brexit Terms

Another day, another Brexit negotiation story.

According to RTE reporter Tony Connelly, “EU and UK negotiators have agreed a text on how to avoid a hard border on the island of Ireland, which will form part of the Withdrawal Agreement.”

And of course, the algos read the headline and bid cable back above 1.30…

The bottom line – as with so many stories surrounding this negotiation, don’t hold your breath for this headline to be confirmed.

Bloomberg reports that a senior official said it would be wrong to say negotiations were “concluded”, and that there was still some “shuttling” between London and Brussels.

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“The Collapse Has Begun” – GE Is Now Trading Like Junk

Two weeks after we reported that GE had found itself locked out of the commercial paper market following downgrades that made it ineligible for most money market investors, the pain has continued, and yesterday General Electric lost just over $5bn in market capitalization – while far less than the $49bn wiped out from AAPL the same day, it was arguably the bigger headline grabber.

The shares slumped -6.88% – after dropping as much as -10% at the lows – after the company’s CEO, in an interview with CNBC yesterday, failed to reassure market fears about a weakening financial position. The CEO suggested that the company will now urgently sell assets to address leverage and its precarious liquidity situation whereby it will have to rely on revolvers now that it is locked out of the commercial paper market.

Indeed, shares hit levels first seen in 1995 yesterday and have only been lower since, very briefly, during the financial crisis when they hit $6.66 in March 2009. For a bit of perspective, Deutsche Bank notes that the market cap of GE now is $69.5bn and it’s the 80th largest company in the S&P 500. Yet in August 2003, GE was the largest company in the index (and regularly the world between 1993-2005) at a market cap of $296bn, $12bn more than Microsoft in second place. Since then, the tech giant has grown to be a $826bn company well over 10 times the size, while GE’s market cap peaked (ironically) during the dot com bubble in August 2000 at $594BN before tumbling first in the tech crash and then the GFC.

But while most investors have been focusing on GE’s sliding equity, the bigger concern is what happens to the company’s giant debt load, especially if it is downgraded to junk.

First, some background: GE had about $115 billion of debt outstanding as of the end of September, down from $136 billion a year earlier. And while GE is targeting a net EBITDA leverage ratio of 2.5x, this hasn’t been enough to appease credit raters, which have expressed concern recently that GE’s beleaguered power business and deteriorating cash flows will continue to weaken the company’s financial position. As a result, Moody’s downgraded GE two levels last month to Baa1, three steps above speculative grade. S&P Global Ratings and Fitch Ratings assign the company an equivalent BBB+, all with stable outlooks.

The problem is that while the rating agencies still hold GE as an investment grade company, the market disagrees.

GE – a top 15 issuer in both the US and EU indices – was recently downgraded into the BBB bucket, and as recently as September it was trading 20bps inside BBB- bonds. However they crossed over at the end of that month and now trade up to 50bps wide to the average of the weakest notch of IG.

In other words, GE is already trading like junk, and has become the proverbial canary in the coalmine for what many have said could be the biggest risk facing the bond market: over $1 trillion in potential “fallen angel” debt, or investment grade names that end up being downgraded to high yield.

As Deutsche Bank’s Jim Reid notes, GE’s recent collapse has come at time when much discussion in recent months has been about BBBs as a percentage of the size of the HY market. Since 2005, BBBs have been steadily rising as a percentage of HY climbing back above the previous peak in 2014 (175%) before extending that growth to a current level of 274%. Meanwhile, the total notional of BBB investment grade debt has grown to $2.5 trillion in par value today, a 227% increase since 2009, and while it represents just over 50% of the entire IG index. 

Next, to get a sense of just how large the risk of fallen angels in the US is, consider that the BBB part of the IG index is now ~2.5x as large as the entire HY index.

So large BBB companies – and none are larger than GE – with a deteriorating credit story are prone to additional widening pressure as investors fear the risks of an eventual downgrade to HY and a swamping of paper into that market. This, as Deutsche Bank writes, isn’t helping GE at the moment and may be a dress rehearsal for what happens for weaker and large BBB issuers in the next recession.

Which brings us back to GE, which while not trading as a pure play junk bond just yet, is well on its way as the following chart of GE’s spread in the context of both IG and HY shows.

Which is both sad, and ironic: as Bloomberg’s Sebastian Boyd writes this morning, “the company’s CEOs boasted of its AAA rating as a key strategic asset, but it was more than that. The rating, which it maintained for more than half a century, was symbolic of the company’s status as a champion of American commerce. Now, Microsoft and Johnson & Johnson are the only U.S. corporates with the top rating from S&P.”

And while rating agencies have yet to indicate they are contemplating further cuts to the company’s investment grade rating, the bond market has clearly awoken, and nowhere more so than in the swap space, where GE’s Credit Default Swaps have exploded in recent weeks.

What kind of an impact would GE’s downgrade have? With $48 billion of bonds in the Bloomberg Barclays US Corporate index. GE would become almost 9% of the BB universe. And one look at Boyd’s chart below shows that the market is increasingly pricing GE’s index-eligible bonds as junk, especially in the context of the move over the past month.

An additional risk to the company’s credit profile: GE has more debt coming due in the next 18 months than any other BBB rated borrower: that fact alone makes it the most exposed to higher rates according to Boyd.

Meanwhile, GE’s ongoing spread blow out, and junk-equivalent price, has not escaped unnoticed, and as we have been warning for a while, could portend a broader repricing in the credit sector. As Guggenheim CIO commented this morning, “the selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun.”

Then again, Minerd’s concern pales in comparison to what some other credit strategists. In an interview with Bloomberg TV on November 8, Bruce Richards, chairman and chief executive officer of the multi-billion Marathon Asset Management warned that overleveraged companies “are going to get crushed” in the next recession.  Richards also warned that when the cycle does turn, “with no liquidity in the high-yield market to speak of, when these tens of billions or potentially hundreds of billions falls into junk land, it’s “Watch out below!” because there’s going to be enormous price adjustments.”

Echoing what we said above, Richards noted that about $1 trillion of bonds are rated as BBB, as investment- grade, when they has leverage ratios worthy of junk, adding that “the magnifying glass is now shifting” toward ratings companies.

For now the “magnifying glass” appears to have focused on GE, and judging by the blow out in spreads for this “investment grade” credit, what it has found has been unexpected. Which brings us to the question we asked at the top: will GE be the canary in the credit crisis coalmine and, when the next crisis finally does strike, the biggest fallen angel of them all?

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