iftttwall

Exactly one week ago, when BofA’s Michael Hartnett explained what global capital markets need to rebound from their recent doldrums, he laid out what he sees are the world’s two biggest problems:

• Problem 1: US economy in “bad Goldilocks”, i.e. US economy not hot/strong enough to lift global GDP & EPS; but not cold/bad enough to induce global coordinated response
• Problem 2: global policy-maker rhetoric in recent days shows “coordinated innocence” not stimulus, all blaming global economy for weak domestic economies (“Overseas factors are to blame”…Japan PM Abe; “drag on U.S. economy from greater-than-expected-slowdown in China & other EM economies“…FOMC minutes; “increasing concerns about the prospects for the global economy”…ECB Draghi; “the change in China’s growth rate can be attributed in part to weak performance of the global economy”…PBoC)

That recaps the problems; as to what the markets need he said the following:

“We remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations and credit conditions.”

It was the expectation of a “massive policy stimulus” out of this weekend’s G-20 that unleashed last week’s furious short squeeze on concerns that shorts could be steamrolled by some G-20 surprise, as remote as it may have been. Citi’s Brent Donnelly confirmed as much: “the relevant question now is whether or not this 160-handle rally in SPX (!) is partially attributable to shorts squaring up ahead of the G20 meeting.” His answer: absolutely.

Indeed, as we reported yesterday, the G-20 has come and gone and has been a total flop, which was also not exactly a surprise: As Hartnett also said one week ago, “stabilization of “4C’s” (China, Commodities, Credit, Consumer) allowed SPX 1800 to hold/bounce to 1950-2000; weak policy stimulus in coming weeks could end rally/risk fresh declines to induce growth-boosting policy accord.“

Donnelly was just as blunt: “I would say the rally in the past two days has had extra momentum because of G20 and now shorts should be looking to reestablish—so I think stocks should trade weak from here into Monday.”

Worse, it was not just that the G-20 disappointed; it actually left everyone even more confused than going into the weekend:

Ambiguity on dealing with exchange rate swings also left market participants guessing. The policymakers reiterated that such volatility “can have adverse implications for economic and financial stability. At the same, they forswore “competitive devaluations” and vowed not to “target our exchange rates for competitive purposes.” It isn’t clear from these two sentences whether Japan has license to try to reverse the yen’s gains against the dollar since the start of the year, assuming it can stop the run-up.

Ok, so the G-20 not only disappointed it also left market watchers scratching their head making the case for further downside more credible, but what about the lingering risk of another major central bank intervention in the coming days: after all on deck as the BOJ’s meeting as well the the ECB.

The problem for the BOJ is that after it pulled the ridiculous NIRP stunt, it may have no political capital left for further surprises, and certainly no ammo. According to the Nikkei, “Bank of Japan Gov. Haruhiko Kuroda assured reporters on Saturday that no fellow G-20 officials had voiced objections to the BOJ’s negative interest rate policy. But Jeroen Dijsselbloem, the Dutch finance minister and president of the Eurogroup of eurozone finance chiefs, said “there was some concern that we would get into a situation of competitive devaluations” as a result of the BOJ’s move.

Osamu Takashima at Citigroup Global Markets Japan said that “Japan’s policy of trying to lift its economy by moving the yen in a weaker direction with monetary policy isn’t very welcome.”

He added that if the G-20 statement is seen as a deterrent against fresh monetary stimulus from the BOJ, another bout of yen appreciation may follow, and with it a renewed sell-off in Japanese stocks.

As the Yen appreciates, that would imply further selling in the S&P as more carry trades are forced to be unwound, especially since the market finally understands what Hartnett really meant when he said that “we remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response begins.”

In other words, after the squeeze, now the next leg lower can start – one which prompts central banks to intervene. And since the BOJ is now sidelined, it means the ball is entirely in the court of the ECB. This is how Citi’s head of FX Steven Englander lays out the next steps:

1. Policymakers are more likely to blame bad luck than policy ineffectiveness for the way in which currencies move. They will be mindful of concerns on banks from negative rates and flat curves, and will probably find some way of cushioning banks from the impact of their moves.
2. The fear of policy ineffectiveness has led investors to downgrade both the impact of future policy moves and the probability of future policy moves. If central banks come back with further eases, with some provisions to cushion the impact on bank profits, there will be a partial bounce back in asset markets. Financial markets may still respond, even if the expected impact on final demand on inflation is limited.
3. The ECB is in focus. EZ is undershooting on growth and inflation, and ECB President Draghi has been impassioned on the need to provide more stimulus. If they lowball or grudgingly meet expectations, we could face another December 4 move because market participants will see it as the equivalent of a ‘last ease in the cycle announcement’, basically ECB throwing in the towel. If they move aggressively (and take measures beyond vanilla QE and 10bps on rates), they will catch market off guard and unwind the view that policymakers see themselves as powerless.

In other words, the next big move in the market is now entirely in Mario Draghi’s hands.

via Zero Hedge http://ift.tt/1Qe56lV Tyler Durden

Submitted by Jim Quinn via The Burning Platform blog,

More Than 30 Blocks Of Fiscal Irresponsibility

“Democracy is a pathetic belief in the collective wisdom of individual ignorance. No one in this world, so far as I know—and I have researched the records for years, and employed agents to help me—has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.” – H.L. Mencken, Notes on Democracy

I’ve written dozens of articles about the 30 Blocks of Squalor over the years. The 30 blocks are essentially from 69th Street to 39th Street encompassing the wretched potholed route from unsafe Upper Darby through the killing fields of West Philly. The fine union government workers in the Streets Department have consistently maintained Chestnut Street in a constant state of disrepair. Not that drivers notice.

When there is an accident on the Schuylkill Expressway in the morning I’m forced to run the 30 Blocks gauntlet down Chestnut Street. I’ve had to do it a few times in recent days. The expletives flowed in waves as I hit four unmarked craters in the center lane. These were not the common everyday West Philly potholes that pock the landscape like it’s the moon. At least if you see a local resident fishing in the pothole, you can avoid it.

These four separate craters were man made, or to be honest, created by a bunch of government union drones, not refilled with blacktop or marked with an orange cone. The question is whether this is utter incompetence, blatant indifference, spite or a business transaction between government drones and local tire dealers. Luckily, government traffic engineers have been too swamped to properly time the lights on Chestnut Street for the last 20 years, so no one can travel faster than 15 mph anyway. Government lessens the pain of their ineptitude through their ineptitude in another area. They call that a win win in Philly. As the light at 57th and Chestnut remains on blinking yellow for a week, it makes you wonder what pressing issues are occupying the fine highly compensated union Streets employees.

 

I’ve now been navigating the crumbling ghetto of West Philly for the last ten years. I can without equivocation state I have not seen one new private business open its doors on Chestnut Street, in Mantua, or any other area I travel in West Philly during the entirety of those ten years. The existing businesses – nail and hair salons, fast food joints, bars, liquor stores, porn video outlets, smoke shops, car washes, more bars, and hysterically tax return offices (earned income tax credits) – haven’t invested a dime in keeping up their appearances. Maybe they used all their spare cash to sure up the bars on their windows and the roll down steel gates necessary to keep the upstanding neighborhood honor student juveniles from having a little fun.

It appears there is an existential shortage of paint, hammers, garbage bags, wedding rings, and employed upstanding men taking responsibility for the children they father in West Philly. There is plenty of yellow crime scene tape, as West Philly accounts for a significant portion of Philadelphia’s 280 annual murders (up 13% in 2015). Houses originally well built in the 1950s and with some upkeep would still be fine homes, are in disrepair, with collapsing porches, dilapidated gutters and roofs, crumbling sidewalks, boarded up windows, and satellite dishes on every one.

The lucky end units usually have a mural of black people doing great things, with trash, garbage and overgrown weeds underneath and black people not doing great things shuffling along the streets.

As you witness the crumbling infrastructure of West Philly, with water mains bursting on a regular basis, streets sinking, houses falling down during heavy rainstorms, boarded up rat infested hovels housing drug addicts, and schools resembling prisons, it leaves you pondering how it came to this and why the fifty year War on Poverty left the people in these neighborhoods mover impoverished. I don’t blame the people stuck living in West Philly. I blame the corrupt politicians who have run the city for the last sixty years.

Liberal solutions based upon welfare handouts, union government workers, idiotic solutions sold by slimy politicians and high taxes have combined to create a morass of uneducated, unmotivated, unmarried people who live in squalor created by the very politicians they have been voting for over the last six decades. The city has been under the complete control of the Democratic Party the entire time.

The only things built in West Philly in the last ten years are government boondoggle projects using taxpayer money. There is a new Social Security Administration building so it’s easy to apply for SSDI because you’re overweight and depressed. There are other government social services buildings to dole out various forms of welfare to the plantation recipients. The welfare slaves don’t even notice their chains.

The government slave owners provide the bare minimum of sustenance to their ghetto slaves in return for their unquestioned voting support in elections. Obama received 98% of  West Philly votes in the last election. There is no need for private businesses, new jobs, marriage (less benefits), personal responsibility, sense of community, education, or self respect. Government knows best and has all the solutions, until they run out of producers to tax into oblivion.

I’ve previously written about the $24 million 683 parking spot garage built on top of a perfectly fine ground level parking lot at the Philadelphia zoo, totally paid for by taxpayer funds and government debt. At least it was built at a 30% union construction premium. I drive by this testament to government pork every work day. It is closed in the morning. It is closed at night. It is empty the entire winter. It is unoccupied at least 75% of the time during a given year. It will never be paid off by the minimal parking fees collected.

The privately owned parking garages in Center City are gold mines. Central Parking is highly profitable. This government created white elephant was unnecessary. The zoo gets busy on a few nice weather weekends all year. They had sufficient parking and overflow parking. It was built because the broke Federal government and the even more broke PA government forked over $16 million of taxpayer funds to create some temporary union construction jobs. It’s a complete waste of taxpayer money.

And then there is the ongoing saga of the Section 8 gated estate called Mantua Square, a $28 million, 101 townhouse, 8 store front testimonial to Keynesian idiocy that sits in the middle of an Obama Keystone Zone. As you cross the bridge on 34th Street to enter the Mantua section of West Philly, there are beautiful murals on the bridge.

There are murals of colorful flowers along the entire bridge.

 

I guarantee you they are the only flowers you’ll ever see in Mantua. Weeds, diseased barren trees, garbage and crumbling sidewalks is what you get in West Philly, along with an occasional dead body. Mantua Square was one of Obama’s shovel ready projects funded by his $800 billion porkulus package in 2009. Every dime came from taxpayers. It was touted as a game changer for Mantua. We were told businesses would open in the 8 pre-built retail spaces and other businesses would follow. A glorious revitalization would materialize due to brilliant government apparatchiks spending your money.

It is now 5 years later and not one storefront is occupied by a single business. Not one black entrepreneur has used their Philadelphia public school education to create a viable business and the jobs that would follow. Of course, no one living at Mantua Square would apply for a job anyway. They would lose their welfare benefits and free housing. Plus it’s only a short walk to the local church handing out free food every Thursday morning. The best part is that union construction workers spent the last six months replacing the facing of all 101 townhouse units due to shoddy union construction in the first place. No biggie. Just another couple million for the taxpayers to fund. The motto of government selected union construction firms in Philly is: “We’re slow, we’re incompetent, but at least we’re the most expensive”.

Did I mention this is gated Section 8 housing, with each unit costing over $250,000, when the median value of the hovels surrounding it is $36,000? The cars parked around this government white elephant include BMWs, Cadillacs, Lexus, and Ford F150s. I also see garbage strewn on the sidewalks, but as I pass by at 7:30 am on the way to my job I don’t see anyone rushing out of their luxury townhouses because they are late for work.

The neighborhood is still a dangerous, drug infested, decaying shithole because one off government created projects do not change the culture or the people. More welfare promotes more dependency. Young black men get murdered in that neighborhood. A young child was raped on the way to school in that neighborhood. The school across from Mantua Square has been muraled, but the kids inside are unruly and uneducated.

Every public school in the city has metal detectors to cut down on the in school murders. They can do that out on the streets, where it belongs. And despite six decades of failed policies, the politicians, teacher’s union, and liberals who run the city insist more taxpayer money will fix everything. One problem. They’ve run out of other people’s money. Maybe the money spent on useless parking garages and Section 8 estates should have been spent replacing water pipes, streets, and encouraging businesses to open in the city through lower taxes and regulations.

I stumbled across an article in the Financial Times the other day revealing why Philadelphia’s infrastructure is crumbling, with absolutely zero possibility of reversing the downward spiral. I find it fascinating a foreign publication had to uncover the ugly truth, while the liberal rag Phila. Inquirer is completely silent on the issue. They just spout the mantra of how the Feds and PA need to give Philadelphia more money. It’s always for the children. The hundreds of billions poured into the public education system in this country over the last decade has been a complete waste of time, mainly because a huge portion of the money doesn’t go towards education, but bloated pensions and administration costs.

More mediocre teachers, more government control, more social engineering, more free breakfasts and lunches, more catchy slogans and more promises have achieved steady declines in SAT scores across the board. The next solution is to phase out SAT scores. Measuring failure isn’t allowed in our politically correct, trophy generation, safe spaces world. Reporting declines in scores on a test that has been an accurate predictor of college success for generations is a micro aggression against the intellectually stunted morons being matriculated through the government run public education system. The $14,000 to $20,000 per student per year spent by the taxpayers across this country just isn’t enough according to those of a liberal ilk. The children would be smart if we just upped the ante by another $2,000 per kid. They’d hire more below average education majors into the teacher’s union. That’s a can’t miss solution.

If you think the national scores are atrocious, and they are, wait until you see the scores from the Philadelphia School District. The students who took the SAT from Philadelphia public schools “achieved” these averages:

Reading – 398 (PA average was 480)

Math – 405 (PA average was 483)

It gets even better. Only the cream of the crop even took the exam. There were 25,768 students in the Phila. public school 11th and 12th grades. Only 5,172 students even took the exam, or 20%. Based on their scores, they probably wouldn’t know how I arrived at 20%. To paraphrase George Carlin, when you see how stupid the 20% SAT takers are, just imagine how stupid the 80% who didn’t take the exam must be. The SAT score predicts your possibility of achieving a passing grade in college.

Based on the scores of the Phila. students, less than 10% of high school seniors are capable of succeeding in college. To prove how warped our higher educational system has become, there were 8,439 graduates and 54% of them enrolled in college. If you were wondering where the hundreds of billions in taxpayer funded student loans are going – here’s your answer. It’s getting doled out to functional illiterates with zero chance of succeeding in college. There’s a 100% chance you will end up paying for the billions in student loan defaults.

Despite a $2.8 billion annual budget, with over $1 billion coming from the State and Feds, the Phila. public school system is a complete and utter disaster. It is so bad the State had to seize control a few years ago by forming a commission to manage it. The buildings are dilapidated, rat infested, filled with mold, and need to be patrolled by police. Teachers are assaulted, principles fake test scores, students brawl, the learning materials are pitiful and little or no learning occurs. It begs to question, where did all the money go? Considering there are only 8,400 teachers and 300 principals, one wonders what the other 9,000 district employees actually do.

There are 199,000 public school students, but only 134,000 are in the Phila. district schools. The other 65,000 are in charter schools. The 16 to 1 student to teacher ratio equals the national average. There were 212,000 students in 2003 with less teachers. More government employees were hired even though student enrollment declined 6%. The teacher’s union doesn’t care about the children. They care about getting their teachers as much as possible, and they’ve done a phenomenal job getting below average teachers gold plated benefits and pensions. The government unions use their voting power over the Democrat politicians to shakedown the taxpayers.

It’s a perfect storm of governmental incompetence, union greed, political corruption, parental disinterest, societal disintegration, and poor life choices, creating the downfall of Philadelphia and other urban enclaves around the country. The Phila. public school system consists of 80% minorities (60% black, 20% hispanic). Over 75% of the population in West Philly is black.

Over 71% of the black kids in West Philly are born out of wedlock. Only 17% of all households are occupied by married couples, while 40% are single mother households. The black men of West Philly are the primary culprits for this ongoing cesspool of ignorance, dependence, crime, and hopelessness. The disregard and scorn for the institution of marriage is a major reason for the median household income wallowing at $26,000, over 50% below the national average.

You get more of what you incentivize and the warped welfare policies in this country incentivize the people of West Philly to not get married and not work. So they don’t. The best method to succeed in life is through higher education. It leads to higher lifetime income. Children from married households do better in school. Married couples also have a much better chance of producing higher household income. Marriage increases the odds of success tremendously for the married couple and their children. The residents of West Philly are caught in an inescapable cycle of poverty, exacerbated by the government welfare policies supposed to help them.

The Financial Times article details why spending on essential infrastructure needs has been ignored and why the future is even bleaker. Government worker pension funds across the nation are in deep trouble, with no chance of honoring their promises. Public pension plans have promised to pay out $4.7 trillion more than they have on hand. Every U.S. citizen would have to pitch in $15,000 to pay every government worker’s promised pension. It’s not gonna happen.

BlackRock, the world’s largest money manager, expects 85% of U.S. public pensions to fail over the next three decades. Certain state pensions are ridiculously underfunded, with Illinois only able to cover 22% of its promised payments, Connecticut only 23%, and Kentucky only 24%. The Central States Pension Fund, which manages almost $18 billion for 400,000 workers in 37 states recently was forced to cut benefit payments by as much as 61%. Retirees currently getting monthly checks for $3,000 will only get $1,180 now.

This will happen to every government pension fund in the country because math is hard. Politicians promised government union workers more than they could ever deliver in order to secure their votes. Any government worker counting on these promises from corrupt politicians should acquire a taste for cat food and get used to setting their heat at 55 degrees in the winter. The City of Philadelphia has one of the worst pension schemes in the country. It is mathematically unsustainable, but no politician or union boss would ever utter those words to the citizens of their city. They’ll just lie until its too late.

And it’s even worse than the published numbers. According to its actuaries, the City pension owes government workers $10.5 billion, with only $4.8 billion of assets. The annual return assumption of 7.5% is ridiculously overstated. With bonds and stocks priced to deliver 0% returns over the next ten years, the pension is really underfunded by at least $8 billion and not the reported $5.7 billion. The retirement payouts to the 64,000 current and former government employees will eventually be slashed dramatically. It’s just a matter of time.

According to FT:

The fund lost almost 20% in 2009 in the midst of the financial crisis. Overall, however, it has performed well, returning 7.4% a year on average since 1995, making its huge deficit all the more surprising. The pension contributions are eating up more and more of the city’s budget, leaving less money to spend on services such as the fire brigade, police and recycling. The cost of pension contributions has increased from 6% of the city’s budget to 15% over the past decade.

The contractually required pension contributions are on automatic pilot to consume 20% of the city budget over the next five years, and the plan will still be underfunded by 60% to 70%. The average pension plan in the U.S. is “only” underfunded by 25%. Rather than deal with reality, city politicians have funded the pension deficits with higher sales taxes and cigarette taxes, further punishing their poorest citizens. As pensions account for an ever larger share of the city budget, the infrastructure of the city and schools will continue to crumble. Businesses and the producer class will continue to flee the city as taxes are relentlessly raised to honor union worker contracts. The downward spiral will accelerate.

FT was flabbergasted by the ridiculous nature of a plan created by corrupt politicians and greedy unions:

Despite the strain the pension fund puts on the city’s services, the scheme paid out a bonus to its members last year. Under the city’s rules, when the fund performs better than its target, some retirees get a bonus. In 2014, the scheme returned 15.7%, double its target. The bonus payout is one of the few topics Mr Dubow seems reluctant to discuss — notably whether it is controversial to pay bonuses to retired members when the scheme has less than half the money it needs for those actively paying into it. He cautiously responds that this is a requirement of the fund and will not discuss the matter further.

Heads the union workers win, tails the taxpayer loses. When the market does well select high level retirees get bonus payments, but when the market performs below expectations there is no penalty for those same retirees. The fiscal debacle destroying Philadelphia was willfully constructed over decades by corrupt politicians, incompetent bureaucrats, greedy government unions, and a foolish citizenry who believed the lies and were too ignorant to do the math. A city run by welfare redistributionists eventually runs out of other people’s money. The wisest citizen in Philadelphia history understood the danger of creating a welfare culture 250 years ago. He was a big supporter of education (founded the University of Pennsylvania) and lifting yourself up by your bootstraps to succeed in life. Too bad his wisdom was not heeded.

“I am for doing good to the poor, but…I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed…that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Benjamin Franklin

via Zero Hedge http://ift.tt/21tzMIi Tyler Durden

It’s one thing for the republican establishment to throw up all over the candidacy of Donald Trump: frankly, the GOP has not been relevant as a political power ever since Boehner started folding like a lawn chair to Obama’s every demand just around the time of the first US downgrade, and as such what the Republican party – torn apart and very much irrelevant as the best of the “establishment” GOP candidates demonstrate – thinks is largely irrelevant.

However, when such stalwart titans of financial establishmentarianism as the Council of Foreign Relations and “The Economist”, who until now had been largely ignoring Trump’s ascent in the political hierarchy finally unleash an all out assault and go after Trump on the very same day, you know that the flamboyant, hyperbolic billionaire has finally gotten on the nerves of some very high net worth individuals.

Below are excerpts from the panicked lamentations of the Economist as written down this weekend in “Time to fire Trump“

* * *

The front-runner is unfit to lead a great political party, let alone America

 

 

IN A week’s time, the race for the Republican nomination could be all but over. Donald Trump has already won three of the first four contests. On March 1st, Super Tuesday, 12 more states will vote. Mr Trump has a polling lead in all but three of them. Were these polls to translate into results, as they have so far, Mr Trump would not quite be unbeatable. It would still be possible for another candidate to win enough delegates to overtake him. But that would require the front-runner to have a late, spectacular electoral collapse of a kind that has not been seen before. Right now the Republican nomination is his to lose.

 

When pollsters ask voters to choose in a face-off between Mr Trump and Hillary Clinton, the Democratic front-runner wins by less than three percentage points. Mr Trump would have plenty of time to try to close that gap. An economy that falls back into recession or an indictment for Mrs Clinton might do it for him.

 

That is an appalling prospect. The things Mr Trump has said in this campaign make him unworthy of leading one of the world’s great political parties, let alone America. One way to judge politicians is by whether they appeal to our better natures: Mr Trump has prospered by inciting hatred and violence. He is so unpredictable that the thought of him anywhere near high office is terrifying. He must be stopped.

… just in case there was any confusion what The Economist thinks.

If the field remains split as it is now, it is possible for Mr Trump to win with just a plurality of votes. To prevent that, others must drop out. Although we are yet to be convinced by Mr Rubio, he stands a better chance of beating Mr Trump than anyone else. All the other candidates—including Mr Cruz, who wrongly sees himself as the likeliest challenger—should get out of his way. If they decline to do so, it could soon be too late to prevent the party of Abraham Lincoln from being led into a presidential election by Donald Trump.

And then there is the Council of Foreign Relations’ Benn Steil with “Selling America Short” of which sections have been excerpted below:

The country would cease to be great under a President Trump

 

Following his primary victories in New Hampshire, South Carolina, and Nevada, Donald Trump has established himself as the clear frontrunner for the Republican presidential nomination. He has done so offering grandiose slogans — He’ll Make America Great Again! He’ll have us win so much we’ll get bored with winning! — and precious little in specifics. He has said, for example, that he would repeal Obamacare, without saying a word about what would replace it — beyond promising that his health program would be “terrific” and “take care of everyone.”

 

* * *

 

If Trump were to order the U.S. military to act as he suggests, the likely result would be a crisis in civil-military relations. Many military personnel would refuse to carry out orders so blatantly at odds with the laws of war; soldiers know that they could face prosecution under a future administration. If soldiers were to do as President Trump ordered, moreover, terrorist organizations would have a new recruiting pitch with the world’s Muslims — the need to counter American barbarism.

 

* * *

The radical changes that Trump proposes are all the more dangerous because he is so singularly ill-equipped to manage the resulting turmoil. This is a candidate, after all, who doesn’t know the difference between the Kurds and the Quds Force or have any idea what the “nuclear triad” is. Nor has Trump so far made good on his pledge to attract “top top people” to help him run things; he has still not unveiled a campaign foreign policy team in spite of months of pledges to do so. In any case, advisers cannot make up for a president’s ignorance and prejudice; presidents always get conflicting advice, and it is their job, and their job alone, to make the most difficult judgment calls in the world.

 

Trump has already done considerable damage to America’s reputation with his crude, bombastic, and often ugly rhetoric. American standing, as measured both in “soft power” and more traditional realpolitik terms, would suffer far more if he were to become commander in chief. A Trump presidency threatens the post-World War II liberal international order that American presidents of both parties have so laboriously built up — an order based on free trade and alliances with other democracies.

 

His policies would not make America “great.” Just the opposite. A Trump presidency would represent the death knell of America as a great power.

So just whose nerves has Trump gotten on?

Here is a summary of the current and honorary directors of the CFR, who basically double down as a ‘who is who’ list of everyone relevant in modern finance:

• Carla A. Hills
• Robert E. Rubin
• David M. Rubenstein
• Richard N. Haass
• John P. Abizaid
• Zoë Baird
• Alan S. Blinder
• Mary Boies
• David G. Bradley
• Nicholas Burns
• Steven A. Denning
• Blair Effron
• Laurence D. Fink
• Stephen Friedman
• Ann M. Fudge
• Timothy F. Geithner
• Thomas H. Glocer
• Stephen J. Hadley
• Peter B. Henry
• J. Tomilson Hill
• Susan Hockfield
• Donna J. Hrinak
• Shirley Ann Jackson
• James Manyika
• Jami Miscik
• Eduardo J. Padrón
• John A. Paulson
• Richard L. Plepler
• Ruth Porat
• Colin L. Powell
• Richard E. Salomon
• James G. Stavridis
• Margaret Warner
• Vin Weber
• Christine Todd Whitman
• Daniel H. Yergin
• Madeleine K. Albright
• Martin S. Feldstein
• Leslie H. Gelb
• Maurice R. Greenberg
• Peter G. Peterson
• David Rockefeller

And here are the Trustees and the Board of The Economist:

• Baroness Bottomley of Nettlestone PC, DL
• Tim Clark
• Lord O’Donnell CB, KCB, GCB
• Bryan Sanderson
• Rupert Pennant-Rea
• Chris Stibbs   
•  Sir David Bell   
• John Elkann   
• Brent Hoberman   
• Suzanne Heywood   
• Zanny Minton Beddoes
• Baroness Jowell
• Sir Simon Robertson
• Lady Lynn Forester de Rothschild

It is the fact that practically every member of the ultra high net worth establishment and “0.01%” loathes Trump with a passion, that he may be just a few months from claiming the US presidency.

via Zero Hedge http://ift.tt/1oHQqCn Tyler Durden

Via GEFIRA,

Two years have passed since Yanukovich was deposed and, as it turns out, another ruthless clan of oligarchs has taken power. No wonder then that Ukraine is heading for a new wave of violence and chaos. Oligarchs are fighting each other, the IMF is pulling out of the country, officials issue laws and regulations only to see them repealed within a day or two by others, and raided European companies are leaving the country after being robbed by the so-called pro-Brussels oligarchic elite. 

It was evident from the beginning that the US and NATO-sponsored power transition was doomed to fail. Prime Minister Yatsenyuk made no secret on his personal website about his principal partners, NATO and Victor Pinchuk’s foundation. Victor Pinchuk is a link between the Ukraine corrupt oligarchic establishment and the Western political elite. In 2005, the BBC depicted him as a paragon of Ukraine’s kleptocracy:

“Ukraine’s largest steel mill has been bought by Mittal Steel for $4.8bn (£2.7bn) after an earlier sale was annulled amid corruption allegations.

 

The Kryvorizhstal mill was originally sold to the son-in-law (Mr. Pinchuck) of former President Leonid Kuchma for $800m.

 

It was one of the scandals that sparked the Orange Revolution and propelled President Viktor Yushchenko into power.")

Directly after the power transition, European leaders understood that the situation in the Ukraine was unmanageable, which we know from a confidential telephone conversation between Minister Paet (Minister of Foreign Affairs of Estonia) and Mrs. Ashton (High Representative of the Union for Foreign Affairs and Security Policy) that became public. Both politicians understood that the Maidan protesters had no trust in the politicians who formed the new coalition. Mr Paet said, “there is now stronger and stronger understanding that behind snipers it was not Yanukovich, but it was somebody from the new coalition." Their conversation makes it clear that both European politicians understood that, contrary to the official statements coming from Brussels, Europe has no solution for Ukraine’s problems and no trust in its new leaders.

Petro Poroshenko, one of the oligarchs, became the fifth president. In line with his predecessors, he had amassed an astonishing personal wealth by mixing politics and business on behalf of the Ukraine population. He started his career under the notorious President Kuchma and served as a minister under deposed President Victor Yanukovich. One can hardly imagine a more troubled new president for a country that has to reform itself and get rid of corruption.

In 2014 Brian Bonner, the Kyivpost chief editor, wrote: “Allowing prosecution of Kuchma (concerning the murder of a journalist) is acid test for whether Poroshenko will put national interests above his own.". Asking Poroshenko to “kill” his close friend and crony, former President Kuchma and the father-in-law of the powerful Pinchuk is a dramatic plea by the chief editor aimed at forcing President Poroshenko to show whose side he takes. Poroshenko’s answer came quickly: he rewarded Kuchma with a top position in the Minsk negation team.

Within months after the power transition, investigative journalist Tetiana Chornovol, who lead an anti-graft body, quit, calling her time in the government “useless” because there was no political will to conduct “a full-scale war" on corruption.

In the two years that followed rumour of ongoing corruption has not ceased. For Poroshenko and his fellow oligarchs, the biggest threat is not Putin and the separatists in the East, but the pro-Ukraine militia that only on paper were merged with the Ukraine army.

The militia regards the Western-backed oligarchs as the second biggest threat to the Ukrainian nation. We believe the oligarchs are the primary cause of the rot in Ukraine’s government.

Meanwhile, the Brussels elite is trying to sell the Ukraine 2014 power grab and the resultant association treaty as a way to help Ukraine to overcome its political corruption.

The Dutch government wrote in its communique to its citizens: “This cooperation gives Ukraine a chance for a better future. The country wants to become a genuine democracy, without corruption and with a wealthy population. The European association treaty is the foundation for the national reforms.”

Maybe this is the intention of many naive European politicians, it is not the intention of the Ukrainian elite who under Poroshenko consolidate their power. The Swiss-based company Swissport, a leading airport service company, and its French investors learned this the hard way.

In 2012 the UK-based logistic website the “theloadstar” wrote:

“Swissport, the Swiss ground handler stands to lose some $8m in assets in the Ukraine while other foreign investors could shun Ukraine, following an attempt to forcibly strip the company of its majority stake in Swissport Ukraine.

 

In a move alleged to be ‘corporate raiding’, an increasingly common phenomenon in the country, 30% shareholder of Swissport Ukraine, Ukraine International Airlines (UIA), has claimed that Swissport International (SPI) violated its minority rights – a “baseless” allegation, according to the handler. During interim court proceedings the judges were changed twice – at the very last minute – before the hearings.”

During the reign of Yanukovich, Kolomoisky (Poroshenko ally) try to strip Swissport from it assets. It did so by forcing the company to sell its multi-million majority stake for 400.000 Euro, using the corrupt Ukraine administration and the justice system. We cannot blame the company that it believed its problem was solved in 2014. The Washington and Brussels elite presented the new Kiev government as a tool in the fight against inherited Ukrainian corruption. During 2014 Swissport seems to have fought a successful battle against injustice. But at the end of 2014, the highest judicial body in Ukraine ruled that the company had to sell its multi-million investment to Kolomoisky for 400.000 dollars. The company said that it never received the 400.000 Euro from Mr. Kolomysky.

Ihor Kolomoiskyi is the oligarch President Poroshenko installed as governor of Dnepropetrovsk. That Kolomoisky enjoyed the full protection of Poroshenko became apparent as he was not prosecuted after he had orchestrated an armed raid on UkrTransNafta Ukraine state-owned oil firm. To spare President Poroshenko the embarrassment, Kolomoyskyi offered his resignation.

Ihor Kolomoiskyi is the founder of the Brussels-based European Jewish Parliament that served to increase his influence in Brussels. A worrisome sign that Ukraine’s political rot is spreading into the European Union.

Swissport raid and forceful eviction from Ukraine was an embarrassment for those who try to uphold the illusion Ukraine was in the process of becoming a genuine democracy free of corruption.

It could hardly be a surprise that a year after Kyivpost publication that Swissport had left Ukraine, Aivaras Abromavi?ius, Minister of Economics in Poroshenko’s cabinet and one of Washington’s principal allies in Kiev resigned.

After Abromavi?ius it was Deputy Prosecutor General that resigns due to unstoppable corruption. 15 February Deputy Prosecutor General Vitaliy Kasko wrote in his resignation letter:

“…This desire is based on the fact that the current leadership of the prosecutor’s office has once and for all turned it into a body where corruption dominates, and corrupt schemes are covered up. Any attempts to change this situation at the prosecutor’s office are immediately and demonstratively persecuted.

 

Lawlessness, not the law, rules here…..”

A day later General Prosecutor Victor Shokin, who analysts say, is an ally of President Poroshenko, has to quit. Viktor Shokin agrees to step down after President Poroshenko asked him to leave office Western leaders and reform-minded Ukrainian officials have long been calling for Shokin’s resignation.

At the same time, Ukraine headed for a standoff between its two most powerful politicians after Prime Minister Arseniy Yatsenyuk had defied President Petro Poroshenko’s call for his resignation and defeated a no-confidence motion in parliament.

The current chaos in Kiev makes it for the IMF extremely hard to keep Ukraine funded. Brazil’s IMF Director already in 2014 urged not to bend rules for Ukraine. Ukraine had failed the IMF twice before. There is now a sense of panic in Kiev, and so Ukraine leaders start to issue opposite orders. The Central Bank Governor’s ban on money exchange was repealed immediately by Yatsenyuk.

The situation of the population deteriorates rapidly as Ukraine’s currency devalues fast and bond yields spike. Companies start to understand that direct investment can disappear overnight as raided foreign companies are forced to leave the country. Protesters take over Hotels in Kyiv and return to Maidan to demand the resignation of the Ukraine rulers who came to power with the support of Washington and Brussels. Yatsenyuk now becomes a liability for its partner NATO.

It is a just matter of time before the Ukraine nationalistic militias will take power, resulting in a definite split of the country. Poroshenko can postpone the people final verdict by reviving the war in the east, but in the end, he can not escape the day of reconning.

via Zero Hedge http://ift.tt/1TLrlUb Tyler Durden

Back in early 2014, we warned that the Chinese housing bubble has burst, promptly followed by official confirmation by China’s National Bureau of Statistics which showed that in the subsequent several months Chinese home prices and transactions plunged. Since then, however, China – whose economy has been on a steep downward spiral – has desperately scrambled to reflate this most important to its economy bubble, because as a reminder in China three quarters of all household assets are in Real Estate…

 

… despite first suffering the bursting of a shadow debt bubble and then its stock market doing the same.

Still, because in China where there is an excess $30 trillion in closed liquidity (due to China’s closed capital account and outbound capital controls) it has long meant that all that happens when one bubble bursts, is to create another asset bubble, which then bursts and the original bubble is again reflated.

Which is precisely what has happened to China’s housing where we can now officially say that the bubble is back…

 

… if only however in the first-tier cities. In fact, according to the latest data, the bubble among China’s top, or “Tier 1” cities has never been bigger entirely at the expense of all other cities.

According to the latest NBS new home price update, in November the first-tier plus Xiamen were 55% of the national price increase, with Shenzhen nabbing 22% of the total national increase the Investing in Chinese Stocks blog reports. In December, those numbers were 54% and 23%, almost no change. In January, the first tier and Xiamen accounted for 52% of the total increase, with Shenzhen alone accounting for 21%, rising 4% mom. In the past year, prices are up an average of 1% nationally. Shenzhen alone is 74% of the total increase yoy. The first-tier plus Xiamen accounted for 141% of the total increase, or without those 5, prices fell 0.4% yoy nationally across 65 cities.

But nowhere is the return of the Chinese housing bubble more obvious than in Beijing where scalpers are charging up to ?3000 for service numbers at the government office where property transfers are recorded, due to long wait times in the wake of the recent transaction tax cuts launched by the government to spur the housing market.

Courtesy of the ICS blog, we get the following translation of what is taking place on the ground in China, where the current bubble du jou has sparked a veritable house-flipping mania:

Transaction Tax Cut Spurs Bubble Activity in Beijing: ?1000 For Reservation Number

 

The specific policies to Beijing, but later than 140 square meters of the only family housing, deed tax increased from 3% to 1.5% of the total housing fund. It does not look great, but the effect was particularly evident.

 

…According to data center statistics, in the first week (February 14 to February 20) after the Spring Festival, Beijing new home net signed volume of only 1006 sets. The secondary residential net signed volume is as high as 6048 units, average daily turnover of 864 units, the highest trading volume since 2010.

 

From the price perspective, the average transaction price 41,490 yuan / square meter, compared with 2015 annual average price rose about 5%.

 

…The new policy to the owners and customers have brought mental changes, including the owners of more brewing prices. Xiao Gu said in Beijing many owners are selling the house for a house, he wants to buy a house prices, he will increase his selling price, eventually leading to a chain reaction.

 

This has resulted in some bubbly behavior: paying for a reservation number:

Now that the volume is large, the transfer of more people, so the reservation number is quite difficult. Due to the large number of people go through, on behalf of the reservation business is also booming. Taobao, enter the word Beijing transfer agent may be seized several shops in this business. In some shops turnover ranking, monthly volume of dozens, mostly ordinary numbers in the thousand or so, the price is even higher if expedited.

 

In a shop, the owner drying out a series of successful single theme, saying last week, supplied a total of 168 successful reservation number, each priced at 999 yuan, if you need a specified time the price increases by 499 yuan.

 

Online news says that there are already scalpers charging ?3000 for a number this week, ?1000 for next week.

IICS then lays out another example of the house-buying frenzy in Beijing, first described in Ifeng:

Last week I posted one example of bubble behavior in Beijing, as people paid up to ?1000 for a service ticket in order to avoid wait times at the property office. Transaction Tax Cut Spurs Bubble Activity in Beijing: ?1000 For Reservation Number

 

Now another example emerges as sellers are throwing out high opening prices. It begins with a sale in Daxing, an outer suburb of Beijing, which saw a property sell for ?47,000 per square meter, followed by news that Vanke had hiked prices on all its projects in Beijing; the company denied the report.

 

The latest news says ?3 million yuan is now the “opening price” for homes that are not too far outside the city. Analysts are more conservative in their estimates, projecting an increase of 5% to 10% in 2016, and say these high prices may be artificial. Still, even if that is true, it reflects an attempt by sellers to cash in on the current mood which increasingly bears the hallmarks of speculative fervor. After Spring Festival, prices in the East Fourth Ring increased ?4,000 to ?5,000 yuan per square meter, or about 10%. The average price hike in the city is about ?1,000 per sqm. 

 

One property near Jinsong subway station (between Guomao and Panjiauan on the 10 line) sold for ?1.8 million before this year, now a similar property is listed for ?2.1 million. The transacted price will be closer to ?1.9 million according to analysts, reflecting the ?1,000 per sqm rise in price.

This behaviour is confusing to our friends from IICS:

I can understand someone wanting to pay to skip at the hospital, but waiting a few days to transfer a property? One reason someone might want to do this is if they fear rising prices. Chinese buyers and sellers will sometimes back out of a transaction if the market moves against them. In this case, if you bought a property before the tax was announced, the seller might try to claw back some of the tax savings. It may also be the case that, as in other situations, wealthier people would rather pay than wait.

To us, there is nothing surprising in this behavior: now that the Chinese stock market bubble has burst, the local population has to find a new asset class which to chase for the next few months, and for the time being that asset is housing; and since the politburo gets to boast that the Chinese economy is “improving” as a result of this scramble, no “macroproudential brakes” will be deployed before it is again too late, the bubble bursts, and all the excess money has to rotate into another bubble du jour. Unless, of course, by then China’s capital account has been fully liberalized and those $30 trillion in Chinese funds can finally chase global assets without the detrminet of even a token capital control firewall.

via Zero Hedge http://ift.tt/1TIuKSp Tyler Durden

Via The World Complex blog,

Here at the World Complex I have been using gold x USDX (i.e., the gold price in US dollars per ounce multiplied by the US dollar index, divided by 100) as a proxy for the value of gold mined by companies not operating in the US. Assuming that their expenses are in some local currency, the cash flow of such companies can be improved either by a rising dollar (gold remaining constant) or a rising gold price. In fact, a rising dollar may be preferable, as when the gold price rises sharply, such companies are often hit with special "windfall taxes"–something I have yet to see when it is the dollar which rises (hopefully nobody gets any ideas about that).

There is a lot of excitement in the gold space in the past few weeks. As we saw over a year ago, there has been a breakout of the gold x USDX from a sizeable triangle.
 

The above chart lends itself to a couple of investment theses. One is that a lot of people seem to make a New Year's resolution to buy a lot of gold, as there is a notable move in the index at the beginning of each of the last three years.

With all the excitement of the last few weeks, it is time to take a closer look. We are at an important point in at least three important respects. At present, gold x USDX is at 1203.79. The peak in the index hit during the move last year was 1229.93. I would submit that the present peak has to exceed last year's level, or else it is just another lower high.
 

Here is a comparison of the performance of gold vs copper over the past six years (both are multiplied by USDX, gold is US$ per oz, copper in US$ per pound). The way this is plotted, wherever the two curves intersect, the gold-copper ratio is 400. Right now, gold is about 600x the price of copper. Historically, a ratio this high is uncommon–we last saw it briefly in 2009.

Ordinarily, I would say the above chart is a little scary for goldbugs, as it would seem to predict a drop in the price of gold (or a rise in copper, which seems a little unlikely in this economy). Your expectations will vary depending on your overall investment thesis. If deflationary forces grow stronger, this ratio could very well rise further, just as we are seeing in the gold-silver ratio. While Americans don't seem to think of gold as money, it looks as though someone does. If your hypothesis is that central banks are going to pull out all the stops to fight deflation, your future predictions depend on whether you believe they will be successful.
 

It's been awhile since I posted one of these. The idea here is that the gold price behaves as do many other complex systems in nature–it spends long periods of time in certain areas of equilibrium, punctuated by rapid moves to some other area of equilibrium. There are three areas of relative equilibrium in the above figure. The gold x USDX index has been confined to the middle equilibrium since mid-2013, except for the hopeful little pop last year. Sadly, it didn't reach escape velocity, and fell back into the middle equilibrium.

Our current situation bears very close watching. Once again, we are at a possible breakout point. If we are to see a significant move in gold, we need to see a move towards the upper equilibrium. If the US dollar were to remain strong during such a move, this would suggest a gold price approaching $1400. The next eight weeks or so should tell the tale–either we will be well on the way to the next equilibrium, or we will fall back to the present one.

via Zero Hedge http://ift.tt/1Rd83RE Tyler Durden

 

 

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via Zero Hedge http://ift.tt/21BEXCE williambanzai7

Fearful of a renewed rise in the US dollar, Saxo's chief economist Steen Jakobsen expects a "nasty March" as this will kill commodity stabilization as well as the ability of emerging markets to live up to their expectations to revitalize the global economy. Despite The Bank of Japan's clear "example of how not to do things," Jakobsen warns other central banks will follow Kuroda's cue and, as he explains below, is "shorting everything" as he sees two major canaries in the coalmine.

 

March could be a critical month in monetary policy, and as Jakobsen (via TradingFloor.com) warns, there are at least two canaries in the coalmine to fear…

Two leading FX pairs : GBPUSD and USDJPY have sold of dramatically. The canary in the coal mine? I think so. JPY is the go-to risk-off currency, particularly because the Bank of Japan's evidently failing model of low and negative interest rates. Banking stocks are down by more than 20% since negative yields were introduced. Twenty percent!! This is what is coming to European banks (and later US banks). GBP is offered and for good reason as I wrote in What Brexit really means. Uncertainty is the market's worst enemy and there is plenty to come from the UK – again the bigger casualty could be EUR and the European Union itself. Now we have a fully two-tiered Europe.

The Topix Japan Banking Index is down 46% since its post-Abenomics peak! (Remember all crises come from banking – and most crises in the past 40 years have started in Japan!)

Comment: We have lost most if not all of the “gain” from Abenomics!

I have been allowed to forward my friend Rick Atkinson's time-series analysis of the USDJPY which I asked him to do. It’s not for the fainthearted by the way: Rick sees USDJPY in sub 50 region (and he has been excellent in timing other markets). I will provide full details in a "Steen’s Chronicle Special" tomorrow called: Japan leads the world into trouble.

Meanwhile, GBP is under severe pressure, it's at its lowest since… 2008/2009!

One the market's best "timers", Tom McClellan, has an interesting chart for you:

Source: McClellan Financial Publications: McClellan Market Report

I firmly believe Asia leads DM markets. China via growth and demand, and Japan by having the “model not to follow”. In other words, Japan is leading us down the wrong path and it is clear for all to see that the “Japanese solutions” are just not working.

Japanese-style demographics, lack of productivity, rejection of immigration and antagonism to female participation in the workforce is exactly what we should not do ourselves. Unfortunately, what the European Central Bank is now doing on monetary policy and what British prime minister David Cameron and the EU are doing on immigration, are mirroring Japan's failed policies. We are simply NOT addressing the mal-investment and insist on being non-productive with an incentive structure which increasingly is penalising the saver, the investor, and anyone who is trying to do their best.

March could be a critical month in monetary policy. I have declared central planning dead for the past few weeks. The facts first, and and now price action too, support this thesis.

Strategy:

My model – price based – is short GBPUSD, DAX, S&P, USDJPY, GBPJPY, and AUDJPY. I bought bunds yesterday and am very close to triggering short commodities – all a reflection of my old theme: The USD is everything. With Fed insisting on being hawkish, slightly rising wage costs and EU is two tiers I don’t really see a lot of good things for the next 40 days, but then again I have been wrong many times before, but consider yourselves forewarned.

"Forewarned, forearmed; to be prepared is half the victory" – Miguel de Cervantes.

via Zero Hedge http://ift.tt/1Sarsau Tyler Durden

Submitted by Lance Roberts via RealInvestentAdvice.com,

 

In last week’s missives, I discussed the potential for an oversold, short-covering bounce which was to be used to further rebalance portfolios and reduce equity risk. The target zone was 1940 to allow for the completion of the “risk reduction” process.

“That rally could take the markets back to the previous resistance of 1940 (about a 4% push) from current levels. Such a rally would be enough to suck many of the “bulls” back into the markets pushing markets back into overbought territory and setting up the next decline.”

Chart updated through Friday’s close:

The good news is that the market was able to break above 1940, and the 50-dma, which now clears the way for a push to the 1970-1990 where the next levels of resistance will be found.

The bad news is that the markets are once again extremely overbought and still confined inside of an overall downtrend.

Importantly, as I predicted last week, the 200 and 400-dma has crossed into bearish territory for the first time since the financial crisis. While such a “cross” is not necessarily a signal of the onset of a new cyclical bear market, it does apply yet another level of downward pressure on stock prices. 

The next chart lays out the most probable path of the current bull rally within the confines of an overall bearish trend.

There are quite a few moving pieces here, so let me explain.

• The shaded areas represent 2 and 3-standard deviations of price movement from the 125-day moving average. I am using a longer-term moving average here to represent more extreme price extensions of the index. The last 4-times prices were 3-standard deviations below the moving average, the subsequent rallies were very sharp as short-positions were forced to cover. The vertical blue bars show the previous two periods where bulls regained footing and pushed markets from lows towards new highs. The current setup is indeed similar to those previous two attempts. All we are lacking is some serious “jawboning” from a Fed official about accommodative support to push markets higher.  
  
  

  ---

• The bottom of the chart shows the overbought/sold conditions of the market. The vertical dashed lines show that oversold conditions lead to fairly sharp rallies. The recent rally, while the “best rally of the year,” has responded as expected from recent oversold conditions. With the oversold condition now exhausted, the potential for further upside has been reduced.
  
  

  ---

• With the 125-day moving average trading below the 150-dma, and with both averages declining rather than advancing, the easiest path for prices continues to be lower as downward resistance continues to be built. The arching dashed red line shows the change of overall advancing to now declining price trends. 

 

As I stated, such an advance would correspond with a rally within the ongoing downtrend and sets the markets up for the next retest of recent lows.

But that is must my opinion. There were some really good confirming bits of technical analysis out this past week as well worth sharing with you.

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NO BREAKOUT FOR THE BULLS

Northman Trader had an interesting technical post on Friday showing the technical breakdown of the market from several perspectives. The first, as shown below, is that while the markets closed below the important 1950 level, it did manage to stay above the 50-dma but just barely.

Importantly, Northy also noted the topping pattern I discussed above along with the critical support levels going back to March and October 2014 lows.

But here is the most important point he makes:

“$SPX monthly chart: Unless the $SPX has a miracle rally on Monday it will close the month not having touched its monthly 5 EMA from the underside for the first time since 2009:“

What Northy notes in the chart above is the same message I have discussed over the past couple of months. That message is simple:

“The market is currently suggesting that the bull market began in 2009 has now come to its inevitable conclusion.”

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THE PERFECT STORM

Erin Heim from Decision Point, recently penned an excellent analysis also suggesting that the recent bull rally is NOT the beginning of a new bull market cycle. To wit:

“Indicators in all time-frames don’t always coordinate with each other, but I believe they are beginning to meld right now. I noticed each time-frame was becoming extremely overbought.

 

The first chart shows the On Balance Volume Indicator Suite made up of the Climactic Volume Indicator(CVI), Short-Term Volume Oscillator (STVO) and the Volume Trend Oscillator (VTO). As I said, they don’t often peak at the same time. Dragging a vertical line across the chart, I marked overbought readings peaking at the same time. The result? A price top. But wait, it’s important to point out the green line. There are undeniable similarities in price pattern and indicators that preceded another leg up. However, note volume behavior (blue lines). There is a distinct difference. Volume stayed fairly even during the preceding rally and in this case, volume has been drifting lower.“

“Here’s a three-year chart using the Price Momentum Oscillator (PMO), Swenlin Trading Oscillator – Breadth (STO-B) and Intermediate-Term Breadth Momentum Oscillator (ITBM). These indicators don’t line up very often. The last yellow bar uses a short-term overbought peak for the ITBM with the same result.”

“Conclusion: When all three time-frames become this overbought at the same time, we usually see a correction or sizable decline. Last time on the CVI/STVO/VTO chart, it was a continuation rally; however, volume decreasing on the current rally indicates a decline is more likely.”

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DON’T BUY THE “BUY & HOLD” LINE OF B.S.

I recently penned an entire article on the fallacy of buy and hold investing. However, my friend Jesse Felder via the Felder Report did a super job of reiterating the point this week.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

 

“This quote has been making the rounds since the market’s 2% decline last Thursday. It’s a great quote; I’m a huge Peter Lynch fan. I’ve read each of his books at least twice and recommend them enthusiastically.

 

However, I think there’s an important point to be made here. Peter Lynch managed money professionally from 1977 to 1990 putting up an amazing track record: 29% average annual returns. No doubt this places him in a very elite class of the most skilled investors ever. But he also had a massive tailwind to work with as the stock market was very attractively valued during his entire career.

 

Below is a chart of the total stock market value relative to GDP (via Doug Short). I’ve circled the area that represents Lynch’s career in red:”

“Over the past couple of decades there was maybe only a single month, at the very bottom of the financial crisis, during which stock market valuations neared the levels that Peter Lynch had to work with. And even then those levels, of about 60% market cap to GDP – that we considered cheap, during his career represented the month just before the 1987 crash!

 

Considering what investors have gone through since Lynch retired, the aftermath of the internet bubble, housing bubble and financial crisis, I think it would be very difficult to make the case that they lost far more money over the past couple of decades trying to sidestep these debacles than the money lost by those who didn’t sidestep them.“

“When Treasury Bonds far outperform stocks over a 15 year period, I’d say sidestepping the madness of these markets has paid off fairly well. And considering the fact that stocks are now, once again overvalued to the point that an investor can expect roughly a 0% return over the coming decade, I’d say it will probably pay to sidestep it once again.”

Jesse has this absolutely right. The essence of “buy and hold investing” has been corrupted by Wall Street in the endeavor to turn a traditionally commissioned based business into an “annuity stream.” This is great for Wall Street, but bad for you.

The truth of “buy and hold” investing was best summed up in the following quote:

“Buy when everyone else is selling and hold until everyone else is buying. This is more than just a catch slogan. It is the very essence of successful investing.” – J Paul Getty

Something to think about the next time someone tells you to just “hold for the long term.”

As investors, we should not be basing our investment decisions on “hope,” but rather an analysis of the evidence that would put the highest probability of “winning” in our favor.  While you can certainly continue betting on “weak hands,” any good poker player will tell you that is a sure way to eventually go broke.

via Zero Hedge http://ift.tt/1oQOLLw Tyler Durden