Tag: finance

Facebook on Thursday announced the expansion of their fact-checking army to send “photos and videos to all of our 27 partners in 17 countries around the world,” after using an artificial intelligence which will use “various engagement signals, including feedback from people on Facebook, to identify potentially false content.” 

The company says that because people share millions of photos and videos on Facebook each day, it creates an “easy opportunity for manipulation by bad actors.”  

“The same hoax can travel across different content types, so it’s important to build defenses against misinformation across articles, as well as photos and videos,” said Facebook.

Facebook categorizes photo / video “misinformation” into three categories: “(1) Manipulated or Fabricated, (2) Out of Context, and (3) Text or Audio Claim. These are the kinds of false photos and videos that we see on Facebook and hope to further reduce with the expansion of photo and video fact-checking.” 

So, if Facebook users report a picture or video suspected of being Fake News, Facebook AI will use machine learning to analyze said reports and then filter them to humans to make the final decision on what’s real and what’s fake. 

For example: 

Per Facebook: 

How does this work? 

Similar to our work for articles, we have built a machine learning model that uses various engagement signals, including feedback from people on Facebook, to identify potentially false content. We then send those photos and videos to fact-checkers for their review, or fact-checkers can surface content on their own. Many of our third-party fact-checking partners have expertise evaluating photos and videos and are trained in visual verification techniques, such as reverse image searching and analyzing image metadata, like when and where the photo or video was taken. Fact-checkers are able to assess the truth or falsity of a photo or video by combining these skills with other journalistic practices, like using research from experts, academics or government agencies. –Facebook

As we get more ratings from fact-checkers on photos and videos, we will be able to improve the accuracy of our machine learning model. We are also leveraging other technologies to better recognize false or misleading content. For example, we use optical character recognition (OCR) to extract text from photos and compare that text to headlines from fact-checkers’ articles. We are also working on new ways to detect if a photo or video has been manipulated. These technologies will help us identify more potentially deceptive photos and videos to send to fact-checkers for manual review. Learn more about how we approach this work in an interview with Tessa Lyons, Product Manager on News Feed. –Facebook

“The same false claim can appear as an article headline, as text over a photo or as audio in the background of a video,” Facebook product manager Tessa Lyons said in the statement. “In order to fight misinformation, we have to be able to fact-check it across all of these different content types.”

4chan is going to have a lot of fun with this…

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Several weeks ago, when Trump was battered on the same day by a one-two punch of his former campaign chairman Tim Manafort being found guilty on 8 counts of tax evasion, coupled with his former lawyer Michael Cohen pleading guilty to campaign finance violations, Trump had only glowing words to say for Manafort – who (at the time) refused to turn and cop a plea with federal prosecutors – while not hiding his “displeasure” with Cohen’s decision to cooperate with the Feds.

All that may change very soon, because according to ABC, Manafort has tentatively agreed to a plea deal with special counsel Robert Mueller that will head off his upcoming trial.

While a deal is expected to be announced as soon as Friday, more importantly it remains unclear whether Manafort has agreed to cooperate with prosecutors or is simply conceding to a guilty plea, which would allow him to avoid the stress and expense of trial.

Whatever the outcome, according to ABC, Manafort and his most senior defense attorneys spent more than four hours on Thursday in discussions with a team of special prosecutors who are involved in the ongoing investigation into whether there was collusion between the Trump campaign and Russia.

ABC News spotted the team arriving in a dark SUV Thursday morning, pulling into a secret entrance out of public view at the building where Special Counsel Robert Mueller is based.

The potential plea agreement comes just days before Manafort’s second trial is slated to begin later this month in federal court in Washington, D.C.

As a reminder, Trump’s former right hand mand and 69-year-old GOP operative was charged in Washington, D.C., with several counts of fraud and failing to register as a foreign agent by the special counsel. A second case was opened in Virginia earlier this year on related charges that ended with a jury finding Manafort guilty on eight counts out of an 18-count indictment, which threatens Manafort with a maximum of 80 years behind the bars, although under sentencing guidelines the term is likely to be closer to seven years. He has not been sentenced in that case.

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It seems like it was only yesterday that Bank of England governor Mark Carney was predicting fire and brimstone metaphorically, and a recession literally, if Britain votes for Brexit. Well, Brexit happened, the recession didn’t, and the Bank of England went so far as to hike rates in an attempt to cool off the economy which did everything but enter a recession.

Fast forward to today, when Carney was at it again, and in another masterclass of central banker propaganda, delivered a “chilling” warning to embattled PM Theresa May, warning that a hard, or “no-deal” Brexit could lead to economic chaos as bad as the 2008 financial crash and would unleash a property crash that could see house prices fall by 35%. The property crash would be driven by rising unemployment, depressed economic growth, higher inflation and higher interest rates, the head of the central bank said.

During a briefing of senior ministers on BOE’s modelling on the consequences of the EU agreeing to a skeleton deal, one in which a few ad hoc arrangements are struck and a worst case chaotic exit, Carney said that he would not be able to avert a crisis by cutting interest rates – when the bank also predicted a dire recession – and that inflation and unemployment would rise.

Carney said that unlike the BoE’s rate cut in 2016, this time the shock to Britain’s economy would come from disruption on the supply side, as trading relations between the UK and EU took a hit.

“He explained that in those circumstances, there would be a contraction of supply,” said one witness to the cabinet talks. “If you cut rates you would end up with higher inflation.”

Last week, the governor made similar warnings in public, telling MPs on the Treasury committee that in a disorderly no-deal Brexit, “the real income squeeze will return for households across the country for a few years”.

But what about the UK’s banks: wouldn’t they also be devastated by a hard Brexit, potentially leading to a preemptive bank run? Why, no. Because somehow despite modeling the apocalypse, Carney said the bank’s “stress tests” of the UK’s financial system showed that it could withstand the worst case scenario.

Convenient.

The all too clear political propaganda continued when Carney boosted May’s position, saying that if she struck the Brexit deal based on her much-criticized Chequers exit plan presented to Brussels in July – which has led to several near revolts within Brexiteer conservatives –  the economy would outperform current forecasts, because it would be better than the bank’s assumed outcome.

In other words, anything but a hard Brexit.

One can see why Jacob Rees-Mogg, leader of the Eurosceptic European Research Group, last month called Carney, who earlier this week agreed to stay in post through Brexit until January 2020, “the high priest of Project Fear.”

According to the FT, Theresa May had intended the three-and-a-half hour cabinet meeting to review no-deal contingency plans and to send a signal to the EU that Britain was prepared for the prospect of Brexit talks failing. Instead, Carney – a former Goldman employee and a consummate globalist – and Philip Hammond, chancellor, “joined forces to deliver a blow-by-blow account of why such a scenario would be economically damaging and that there would be little the BoE or Treasury could do about it.”

Hammond said the Treasury would be constrained in its ability to tackle the crisis by boosting spending, noting the country was “still recovering from the aftermath of the 2008 crash” and questioning the effectiveness of a fiscal stimulus in one country.

One observer of the meeting in Downing Street said: “All of the predictions were grim and the numbers were chilling. Carney was listened to respectfully. He took a few questions afterwards, but none of them were hostile.”

Maybe they were not hostile then, but they will be soon: Tory Eurosceptic MPs will soon ridicule the BOE head’s warnings, claiming – correctly – that both the BoE and Treasury both miscalculated the economic consequences of Brexit, which they also painted as a singularly dire event.

Jacob Rees-Mogg, leader of the Eurosceptic European Research Group, last month called Carney, who this week agreed to stay in post through Brexit until January 2020, “the high priest of Project Fear”.

So did the “fear priest’s” threats lead to any change in sentiment? Not at all, as both sides remained entrenched in their views. The only agreement at the cabinet meeting was that a no deal outcome was “unlikely but possible.”

A spokesman told the FT said that Whitehall departments had “significantly ramped up” their no-deal planning in recent weeks. Which simply means that Carney will need to ramp up the apocalyptic forecast even more during his next public appearance.

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Authored by Mac Slavo via SHTFplan.com,

Liberal loon and filmmaker Michael Moore believes that Donald Trump might be America’s last elected president. Moore is worried because he thinks Trump “dislikes democracy” and has “no respect for the rule of law.”

In an interview MSNBC’s Chris Haynes, Moore elaborated on his odd belief on Wednesday night. 

“I think that we have someone in the White House who has no respect for the rule of law, who dislikes democracy by an incredible degree,” Moore said. 

Moore went on to say that Trump is just like all other billionaire CEOs who “rule by fiat.” He claims that those billionaires (who are protected by the government because they buy said protection) are accustomed to near-unilateral autonomy when it comes to running their companies.

“They rule by fiat. They decide. They make the calls, and they don’t like anybody else having a say,” Moore asserted. 

Which is exactly why they own the companies.  They can do whatever they want and rule by fiat if they own the company. And if Moore thinks those who opposed, for example, Obamacare had a say and that wasn’t “rule by fiat”, he’s higher than the international space station.

The truth that no liberal or conservative really wants to hear, is that the government doesn’t care about the public and they haven’t for a very long time. They are concerned with making money and increasing their own power over others and the only way they get that is through continued public compliance with their “ink on paper” laws and voting.

Moore’s suggestion that Trump could be the last US president is an idea Trump has already floated, but not in a way you may think.  Trump suggested abolishing presidential term limits after praising Communist China’s president for his power grab. According to Business Insider, during a speech to Republican donors at a private event in March, Trump lavished praise on the Chinese President Xi Jinping, who has moved to consolidate his own power in the country. Commenting on China’s move to abolish presidential term limits, Trump said: “Maybe we’ll give that a shot someday.”

Again, politicians only want power over others and as long as people are compliant, freedoms will be lost by the day.  No one wants to admit that they are being oppressed by the government they keep voting for, but that’s an unfortunate fact that no amount of propaganda can cover forever.  Even Hitler’s propaganda minister knew that much.

“The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.” ― Joseph Goebbels, Hitler’s Propaganda Minister

“National Socialism is a religion. All we lack is a religious genius capable of uprooting outmoded religious practices and putting new ones in their place. We lack traditions and ritual. One day soon National Socialism will be the religion of all Germans. My Party is my church, and I believe I serve the Lord best if I do his will, and liberate my oppressed people from the fetters of slavery. That is my gospel.”  ― Joseph Goebbels, Hitler’s Propaganda Minister

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Last week it was Morgan Stanley, today it is SocGen’s turn. 

Societe Generale’s latest Global Economic Outlook report titled “Storm Clouds Gathering” is gloomier than the last three editions. The French bank’s posits that while global growth is stable right now, downside risks are becoming increasingly more pronounced. These risks are deeply rooted in cyclical and financial factors, but more importantly in policymaking, predicting that the next US recession looms in 2019/20. 

Four of the bank’s most essential downside risks (Protectionism/ trade wars, Sharp market repricing, European policy uncertainty, and China hard landing) are developing into significant threats. They are laid out in the bank’s now iconic “Swan Chart.”

Over the next 12 months, further intensification of the US-China trade war is set to damage global growth, alongside a sharp repricing in financial markets. SocGen said that while the trade war’s impact on global GDP growth remains hard to quantify, it affirmed that global trade and GDP growth will slow as it would increase import prices in economies that levy tariffs or impose quotas.

Global trade volume already weakening 

Global trade index and China export growth has peaked

Naturally, an all-out trade war between China and the US would hurt China in most plausible scenarios, said the French bank. In 2017, the total Chinese exports to the US amounted to just over $500bn, close to 4 percent of China GDP. A 50% reduction in those flows would make a material dent in China’s growth. And with China’s weight in the global economy at about 15%, this would result in a downside shock to global growth. To get ahead of these shocks, Chinese authorities have already scaled back their shadow banking system in preparation for turbulence. 

SocGen then directed their concerns onto “vulnerable” emerging market economies, particularly Argentina, Turkey, Brazil and South Africa, whose currencies have depreciated by 18-20 percent against the USD since the start of 2018. The attention centers on governance and high external foreign-currency debt in the context of a rising USD and US interest rates.

Tightening of US monetary policy and the end of cheap money is also making SocGen more risk-conscious, adding that a dollar shortage has been primarily the culprit of emerging market chaos.

More importantly, SocGen believes that the US rate hike cycle has more to go (hike until something breaks), and the pressuring of emerging market currencies and asset markets could spill over into 2019. Further, the economies that have ignored the emerging market pressure could come under some pressure in the near term, but mentions unless a lot goes wrong, an emerging market financial crisis seems to be contained.

Meanwhile, the repricing risks in developed economies’ equity markets remain a significant threat. SocGen said US stock market indices have continued to set new records, though most other developed economies’ stock markets are down year-to-date, especially in Europe.

The growing gap between US stock markets and the rest of the world was illustrated in Jeff Gundlach’s podcast prior session. 

It is not just SocGen and Gundlach making the case that US equity markets are at or near a top – Morgan Stanley’s latest report showed that “peak” S&P 500 EPS growth projections are set to decline rapidly into 1H19. 

US expansion strong for now, but the next recession looms in 2019/20 

When it comes to the US economy, the only question is when does the sugar high from Trump’s fiscal stimulus expire:

“The slowdown in US growth in late-2017 and early-2018, mild as it was, has indeed also proven to be transitory, and GDP reaccelerated strongly in 2Q. The strength of the rebound exceeded our expectations and hence our US forecast is up by 0.2pp to 2.8% and 1.6% for this year and next, respectively, the latter still substantially below consensus (around 2.6%). Indeed, we expect quarterly sequential growth to slow from here, and year-on-year growth to top out right around the current rate. For US growth, this was probably as good as it gets.

For the next year or so, the US economy will continue to be boosted by tax cuts and higher government spending, SocGen predicts. This, along with solid employment growth, will sustain private consumption growth at a healthy rate well into 2019. Corporate tax cuts may also be a driver of business investment which has been buoyant recently, but the evidence is not clear, given the relatively narrow scope of this spending, much of which went into IT, software and oil drilling.

Ominously, if tax cuts were a major factor of strength in investment, spending would be expected to be broader in scope. More generally, tight supply conditions are likely playing a greater role than the tax cuts, the bulk of which are being returned to investors via stock purchases. 

As for projected US growth, here is the one chart that President Trump hopes will be very wrong as the alternative is “all downhill from here”.

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Submitted by FarLeftWatch

Antifa groups are using Twitter and Facebook to advocate for the assassination of President Trump

While social media companies collude to silence right-of-center influencers, violent far-left extremist groups appear to be given a pass. This NYC based antifa group has been using their “leftist privilege” to freely violate Twitter and Facebook Terms of Service. In another glaring example of “non existent social media bias”, this extremist group is apparently allowed to use their social media account to advocate for murder.

The Base is a NYC based “anarchist center” that is run by the Revolutionary Abolitionist Movement, a violent extremist group that we have covered extensively. The extremist group is currently offering downloadable poster and stickers that include images of guns and other calls to violence but the most concerning was an image that depicted the murder of President Donald Trump.

Advocating for the murder of your political opposition is very prevalent in far-left circles. Another prominent antifa website, It’s Going Down, is also currently using Twitter and Facebook to distribute a poster that depicts the murder of President Trump. We published a detailed report about this poster almost a year ago and have reported this tweet to Twitter multiple times but it is still live and the extremist group that created it is still free to recruit and radicalize new members on both Twitter and Facebook.

Another prominent far-left website that uses Twitter and Facebook to advocate for political violence is Crimethinc. This “decentralized anarchist collective” designed a distributed a poster that compares Donald Trump supporters to Nazis and encourages their followers to use violence against them.

In this example, a Seattle antifa group is using their Twitter account to distribute the personal information of ICE agents as well as their family members. Just like other Tweets we have referenced in this report, this one is still live even though we have reported it to Twitter multiple time.

There are endless examples of far-left extremist groups using their social media accounts to advocate for political violence but one more that warrants a mention is Redneck Revolt. This paramilitary organization claims to have over 30 active cells nationwide and until recently they offered a downloadable guerrilla warfare manual on their website that included sections on “kidnapping”, “executions”, and “terrorism”.

Why is this important? Firstly, it demonstrates the institutional bias of the giant tech companies that allow these accounts to actively violate their Terms of Service. And secondly, far-left extremist are escalating their violence. Just over the last seven days a GOP office was attacked by an arsonist, there was an assassination attempt of a GOP candidate, and a Democratic Socialist threatened to carry out a mass shooting against Trump supporters in D.C. These violent attacks are the predictable outcome of a media-industrial complex that constantly misrepresents the facts and gaslights Trump and his supporters as “fascists”. “racists”, “bigots”, etc.

The mission of Far Left Watch is to investigate, expose, and combat the far-left. Please share this article via Twitter, Facebook, etc. and encourage friendly media and YouTube content creators to report on this information. 

If you like our work please support us by donating to our Patreon account or making a a one time donation here.

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The heavy losses suffered by Bill Gross’s Unconstrained Bond Fund have been widely discussed, as market commentators have loudly mused about the veteran manager’s tabloid divorce and the continued success that his former colleagues at PIMCO have enjoyed in his absence. And in the latest update on travails facing Gross and his remaining investors, Bloomberg reported Thursday that Gross’s losses have been exacerbated by the conspicuously high leverage ratio he employed at the fund.

According to BBG, Gross pushed the leverage ratio at his Unconstrained Bond Fund to 13:1 during the first half of the year, even as the Treasury yield curve continued to flatten in defiance of his expectations that long-term bund and Treasury yields would converge. 

But unfortunately, as Mario Draghi reaffirmed Thursday morning, the collapse of the “global synchronized growth” narrative has smothered any immediate incentive for the ECB to unwind its massive monetary stimulus, allowing continued “policy divergence” to push spreads wider.

Gross, who as manager of the Janus Henderson Global Unconstrained Bond Fund has struggled to generate returns and attract capital, increased his average futures exposure as much as 13-fold from January through June, according to a filing. The derivative bets may help explain the fund’s turbulence — because while investments in futures can boost potential returns, they can also generate out-sized losses.

Investors have yanked roughly half a billion dollars from Gross’s fund so far this year, according to MorningStar data, as it has suffered several vertigo-inducing pullbacks, including a 3% pullback on May 29 that was the biggest one-day drop of the year among large bond funds. During the first half alone, Gross’s losses totaled $153 million on what was a $2 billion fund at the beginning of the year.

Gross realized almost $153 million of losses on interest-rate futures in the first half, a significant dent for what was a $2 billion fund at the time. It suffered several big swings during the first six months of this year, most notably a 3 percent plunge on May 29. That drop, which was the year’s largest single-day decline by a big bond fund, jarred investors and increased scrutiny of Gross’s stewardship.

“Losing 3 percent in a day in equities is not calamitous, but in bonds it is enormous,” said Richard Klitzberg, an asset management consultant to institutions and high-net-worth families. “He was running billions of dollars and either got the trade completely mis-positioned or was very highly levered.”

Gross said in July that his fund has scaled back his convergence bet. Yet, an Aug. 30 filing suggests Gross used futures to double down on the strategy, only to have it once again blow up in his face. These losses have left Janus’s Unconstrained fund down nearly 6% on the year.

Interest rate futures would be the simplest way to execute Gross’s convergence trade, said David Ader, chief macro strategist at Informa Financial Intelligence, adding that the Janus fund could go long on 10-year Treasuries futures and short on those for 10-year bunds.

[…]

The average value of the fund’s futures contracts purchased rose to $1.45 billion in the first half of this year from $112 million reported for the six months ended Dec. 31, according to the filings. The average value of its futures contracts sold also rose, to $1.1 billion from $214 million, over the same time period.

Janus Unconstrained’s combined losses on futures tied to commodities, currencies, equities and interest rates totaled $212 million during the first half of this year, including the $153 million lost on interest-rate bets. Though the total was partially offset by roughly $86 million of gains on options, that’s a lot of money for any fund to lose on futures, said Ader.

“It gives new meaning to the term unconstrained,” he said.

Janus disclosed that the fund did hold some futures tied to U.S. and German debt, as well as options on such futures, as of March 31 and June 30. The filings don’t show positions on other days during the first half of the year like May 29, instead reporting the average exposure to futures during the period.

Since early this year, Gross’s poor performance has weighed on Janus’s stock, which is down more than 20% this year. And Gross’s boss is quickly growing tired of his one-time star hire’s performance. In a rare public rebuke last month, the company’s CEO described Gross’s performance as “disappointing.”  Meanwhile, Gross’s former employees at Pimco are proving that the firm is thriving without him, a reality that would bruise the ego of even the most mellow investment managers (and as anybody who has followed Gross’s antics over the past three years will know, Gross is anything but mellow).

We wonder: Have the twin humiliations of his divorce and Pimco’s continued success caused the one-time “bond king” to go on tilt? Or is he seeing something that the rest of the market is missing?

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Authored by Nouriel Roubini via Project Syndicate,

Although the global economy has been undergoing a sustained period of synchronized growth, it will inevitably lose steam as unsustainable fiscal policies in the US start to phase out. Come 2020, the stage will be set for another downturn – and, unlike in 2008, governments will lack the policy tools to manage it.

As we mark the decennial of the collapse of Lehman Brothers, there are still ongoing debates about the causes and consequences of the financial crisis, and whether the lessons needed to prepare for the next one have been absorbed. But looking ahead, the more relevant question is what actually will trigger the next global recession and crisis, and when.

The current global expansion will likely continue into next year, given that the US is running large fiscal deficits, China is pursuing loose fiscal and credit policies, and Europe remains on a recovery path. But by 2020, the conditions will be ripe for a financial crisis, followed by a global recession.

There are 10 reasons for this.

First, the fiscal-stimulus policies that are currently pushing the annual US growth rate above its 2% potential are unsustainable. By 2020, the stimulus will run out, and a modest fiscal drag will pull growth from 3% to slightly below 2%.

Second, because the stimulus was poorly timed, the US economy is now overheating, and inflation is rising above target. The US Federal Reserve will thus continue to raise the federal funds rate from its current 2% to at least 3.5% by 2020, and that will likely push up short- and long-term interest rates as well as the US dollar.

Meanwhile, inflation is also increasing in other key economies, and rising oil prices are contributing additional inflationary pressures. That means the other major central banks will follow the Fed toward monetary-policy normalization, which will reduce global liquidity and put upward pressure on interest rates.

Third, the Trump administration’s trade disputes with China, Europe, Mexico, Canada, and others will almost certainly escalate, leading to slower growth and higher inflation.

Fourth, other US policies will continue to add stagflationary pressure, prompting the Fed to raise interest rates higher still. The administration is restricting inward/outward investment and technology transfers, which will disrupt supply chains. It is restricting the immigrants who are needed to maintain growth as the US population ages. It is discouraging investments in the green economy. And it has no infrastructure policy to address supply-side bottlenecks.

Fifth, growth in the rest of the world will likely slow down – more so as other countries will see fit to retaliate against US protectionism. China must slow its growth to deal with overcapacity and excessive leverage; otherwise a hard landing will be triggered. And already-fragile emerging markets will continue to feel the pinch from protectionism and tightening monetary conditions in the US.

Sixth, Europe, too, will experience slower growth, owing to monetary-policy tightening and trade frictions. Moreover, populist policies in countries such as Italy may lead to an unsustainable debt dynamic within the eurozone. The still-unresolved “doom loop” between governments and banks holding public debt will amplify the existential problems of an incomplete monetary union with inadequate risk-sharing. Under these conditions, another global downturn could prompt Italy and other countries to exit the eurozone altogether.

Seventh, US and global equity markets are frothy. Price-to-earnings ratios in the US are 50% above the historic average, private-equity valuations have become excessive, and government bonds are too expensive, given their low yields and negative term premia. And high-yield credit is also becoming increasingly expensive now that the US corporate-leverage rate has reached historic highs.

Moreover, the leverage in many emerging markets and some advanced economies is clearly excessive. Commercial and residential real estate is far too expensive in many parts of the world. The emerging-market correction in equities, commodities, and fixed-income holdings will continue as global storm clouds gather. And as forward-looking investors start anticipating a growth slowdown in 2020, markets will reprice risky assets by 2019.

Eighth, once a correction occurs, the risk of illiquidity and fire sales/undershooting will become more severe. There are reduced market-making and warehousing activities by broker-dealers. Excessive high-frequency/algorithmic trading will raise the likelihood of “flash crashes.” And fixed-income instruments have become more concentrated in open-ended exchange-traded and dedicated credit funds.

In the case of a risk-off, emerging markets and advanced-economy financial sectors with massive dollar-denominated liabilities will no longer have access to the Fed as a lender of last resort. With inflation rising and policy normalization underway, the backstop that central banks provided during the post-crisis years can no longer be counted on.

Ninth, Trump was already attacking the Fed when the growth rate was recently 4%. Just think about how he will behave in the 2020 election year, when growth likely will have fallen below 1% and job losses emerge. The temptation for Trump to “wag the dog” by manufacturing a foreign-policy crisis will be high, especially if the Democrats retake the House of Representatives this year.

Since Trump has already started a trade war with China and wouldn’t dare attack nuclear-armed North Korea, his last best target would be Iran. By provoking a military confrontation with that country, he would trigger a stagflationary geopolitical shock not unlike the oil-price spikes of 1973, 1979, and 1990. Needless to say, that would make the oncoming global recession even more severe.

Finally, once the perfect storm outlined above occurs, the policy tools for addressing it will be sorely lacking. The space for fiscal stimulus is already limited by massive public debt. The possibility for more unconventional monetary policies will be limited by bloated balance sheets and the lack of headroom to cut policy rates. And financial-sector bailouts will be intolerable in countries with resurgent populist movements and near-insolvent governments.

In the US specifically, lawmakers have constrained the ability of the Fed to provide liquidity to non-bank and foreign financial institutions with dollar-denominated liabilities. And in Europe, the rise of populist parties is making it harder to pursue EU-level reforms and create the institutions necessary to combat the next financial crisis and downturn.

Unlike in 2008, when governments had the policy tools needed to prevent a free fall, the policymakers who must confront the next downturn will have their hands tied while overall debt levels are higher than during the previous crisis. When it comes, the next crisis and recession could be even more severe and prolonged than the last.

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Nothing can stop it…

A growing cluster of Hindenburg Omens is raising anxiety levels…

As US equities decouple from the rest of the world and push to ever higher record highs.

As Bloomberg notes, on both the New York Stock Exchange and the Nasdaq there have been eight of these technical patterns over the past six sessions, Sundial Capital’s Jason Goepfert said, the biggest cluster since 2014 and the third-longest stretch in 50 years.

The indicator, named after the German zeppelin that caught fire and crashed more than eight decades ago, gauges indecision in the market and is designed to predict a decline within 40 days.

And while warning signals are flashing in equity land, uncertainty in US Treasury bond markets has plummeted to near record lows…

The CBOE/CBOT 10-year U.S. Treasury Note Volatility fell to 3.38 today, which is the lowest since December when it fell to a record low.

Back to today’s markets, they were uncharacteristically quiet with Trump’s tweet denial of WSJ’s trade talks story the only news catalyst for a move… (Small Caps and Trannies underperformed on the day)

 

But that impact yuan more than stocks…

 

S&P topped 2,900 intraday and it appears someone wanted to ensure a close above that level…

Thanks to some panic-selling of vol in the last 30 mins…

China stocks were miraculously lifted in the afternoon session…

 

If you’re in the mood for a laugh, here is China’s ‘Tesla’ – NIO – which soared 72% today (after its disappointing IPO yesterday at the low end of its range)…

 

 

Treasury yields tumbled on the CPI miss this morning, but retraced those gains after Europe closed…

 

The Dollar Index dropped once again (3rd drop in the last 4 days)…

 

But EM FX was mixed with Argentina and Brazil dropping as Lira, Rand, and Ruble rallied…

Cryptocurrencies bucked their recent trend and ended in the green today, with Bitcoin managing to scramble up to unchanged on the week…

 

Despite the dollar weakness, commodities could not maintain a bid, fading after the CPI disappointment as Reflation bets faded…

 

WTI dropped back below $69 and Gold futures pushed down towards $1200…

 

Finally, we thought it interesting that the entire Chinese stock market capitalization is now just 5 times larger than AAPL’s (down from nearly 14 times back at the peak of its 2015 bubble)…

The country’s stock market, which is no longer the world’s second biggest, has dropped in value as concerns over economic growth and a trade war with the U.S. linger. China’s market capitalization now stands at $5.7 trillion, leaving its multiple over Apple near the lowest since 2012, according to data compiled by Bloomberg.

 

 

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Authored by John Rubino via DollarCollapse.com,

Every once in a while the trading action in a given market breaks through its historically normal boundaries and starts exploring new territory. This can mean one of two things:

Either something fundamental has changed, creating a “new normal” to which participants will have to adapt.

Or the extreme move is a temporary aberration that will eventually be corrected by an equally extreme snap-back into the previous range.

The gold and silver futures markets are posing this kind of question right now, with speculators – who are usually net long – going net short, and commercial traders – who are usually net short – going net long. The following table shows how each group traveled even further into this unfamiliar territory in the past week.

The following chart illustrates how unusual this new market structure is.

During most of the past year the speculators (gray bars) have been extremely long and the commercials (red bars) extremely short. Now they’ve swapped attitudes, with speculators betting that gold is going to fall and the commercials taking the other side of that bet.

The same process is at work in silver, where the departure from the norm is even more extreme. In other words, the speculators are very short and the commercials very long.

Presented graphically, the far right of the chart illustrates just how unusual the current action is. It’s possible that these two groups of traders have never been in this relative position before.

What does this mean? Either something has happened to realign speculator and commercial trader incentives and objectives, putting them permanently on the other side of their traditional positions, or the past few weeks’ action is an anomaly that will be corrected with an extreme move in the other direction.

Which is more likely? The latter almost certainly, because the commercials’ traditional net short position exists for business reasons. Gold and silver miners frequently sell their production forward using futures contracts to lock in a predictable price, and they place their orders through the banks that make up the bulk of commercial traders. As long as the miners continue to hedge, commercial traders will necessarily tend to be net short. Speculators, meanwhile, traditionally take the other side of this trade (because every trade has to have two sides), which means they have to be net long to make the market work. So at some point the balance has to be restored.

The timing is anyone’s guess, since the current market structure is virtually unprecedented. But when it happens it’s likely to be via a “short squeeze” in which the speculators begin to close out their long positions and find that they have to pay way up in order to do so. The resulting panic will bring a little sunshine into gold bugs’ recently dreary lives.

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