The Russian Defense Ministry (MoD) has released stunning footage of yet another intercept of a US spy plane over the waters of the Baltic Sea near the Russian border.
The short video of the engagement involves a Russian Su-27 fighter jet closely shadowing a large US Air Force aircraft, identified as an RC-135 reconnaissance plane. The fast and highly maneuverable Russian fighter aircraft pulls up behind the huge spy plane before advancing forward on the port side below the wing to align with the RC-135.
The Russian MoD released the video on Thursday, however, no precise time details regarding when the intercept took place were given.
The video was described by the MoD when uploaded to its official YouTube channel merely as, “Interception of targets by the Su-27 fighter over the neutral waters of the Baltic Sea.”
Incidents like this one have become increasingly common since the annexation of Crimea in 2014, according to the Russian Defense Ministry.
Back in November, the US complained about an “unsafe” intercept of another plane by an Su-27. As video of that incident showed the Su-27 made a pass directly in front of the mission aircraft. Moscow insisted that the pass was, indeed, safe.
The intercept of the US aircraft follows a similar incident in late January involving a Swedish surveillance aircraft that had been flying over the Baltic Sea.
These sorts of interceptions over neutral waters are very common and entirely within international law. This intercept seems safe, but others can be quite unsafe. In a 2017 incident a Russian fighter closed to within five feet of a RC-135, drawing sharp criticism from the Pentagon.
Both the Pentagon and European nations have in the past called Russia’s engagements over neutral airspace near Russian borders “unsafe” and “unprofessional”.
The US RC-135 possesses a wide range of intelligence gathering capabilities including the ability of geolocating electronic signals as well as identifying and analyzing the electronic emissions of potential adversaries. It can also drop in on communications, and as it’s the size of an airliner it often has military Crypto Linguists onboard who can quickly decipher foreign communications and begin analyzing.
The US Air Force has an expansive fleet of the Boeing made RC-135 family of reconnaissance aircraft, and they’ve been deployed to various parts of the world of late, including to the Caribbean and near Venezuela.
via ZeroHedge News https://ift.tt/2VKo5Mw Tyler Durden
Syria and its allies are preparing their missiles for a forthcoming battle with Israel if Tel Aviv decides to open fire against significant military positions under the control of the Syrian army.
Well informed sources say that “it all depends on the direction the Israeli elections will take. If Prime Minister Benjamin Netanyahu estimates his chances are high enough to win a second term, then he will not venture any time soon into a new confrontation with Syria and its allies. The date of the next battle will be postponed.” The sources further told me, “But, if he believes he will lose the election, then the possibility of his initiating a battle becomes very high.”
Image via the Daily Express
The sources explained: “A serious battle between Israel on one hand and Syria and Iran on the other would be sufficient enough to postpone the elections. Netanyahu doesn’t have many choices: either he wins the election and postpones the corruption court case against him, or he goes to jail”.
US European Command (EUCOM) recently send military airplanes, along with 200 US servicemen carrying THAAD anti-ballistic missile defense systems to be deployed in southern Israel. The official reason for deployment of this very modern and sophisticated system is said to be preparation for a joint drill between Israel and the US.
THAAD will enhance the already existing Israeli anti-missile interception defense systems. These are “Iron Dome” for short-range, “David Sling” for tactical missiles and “The Arrow” for intercontinental ballistic missiles.
The sources said: “The US doesn’t trust the Israeli system, and thus the THAAD system was deployed to hunt down any missiles launched by the Syrian or Iranian forces deployed in Syria as these promised in case of a battle triggered and provoked by Netanyahu. Both Syria and Iran promised immediate retaliation if Israel bombs any significant military positions in those countries. This is why the US has decided to take part in this confrontation, convinced that any future battle will be devastating for all parties”.
A brief explainer of the multiple corruption charges Netanyahu is facing can be found below:
President Bashar al-Assad’s visit to Tehran made it clear to all involved in the Syrian war, especially the EU and the US, that Damascus will never ask Iran to withdraw from Syriato please third parties or in exchange for reconstruction or a normalization of the relationship between the Arabs and Syria or between the West and Syria.
“The visit of the Syrian President to Iran helped President Putin clarify to his visitor Netanyahu that Moscow cannot help Israel with its request to get Iran out of Syria. The relationship between Syria and Iran is robust — Putin explained to his guest, as Damascus has learned — and Russia is in no position to ask for a change in the strategic relationship between the two countries,” said the source.
via ZeroHedge News https://ift.tt/2EMUOKd Tyler Durden
A US Embassy employee flying out of Moscow’s Sheremetyevo Airport is said to have triggered a major security incident when he tried to travel with “an object resembling a mortar shell with a fuse” on Saturday morning, according to Russia’s state-owned RT.
A bomb squad inspected the object and found it to be inert, which the man said he had bought for his “private collection.”
The embassy employee, traveling to New York, missed his flight and was allowed on the next US-bound plane – without his mortar shell. While the Russian Foreign Ministry has called the incident a “provocation” and demanded explanations, RT is having a laugh at the whole thing.
In other failed plane boardings, a Florida man was busted last week for trying to bring an unassembled rocket-propelled grenade launcher (RPG) fom Lehigh Valley Airport in Allentown, PA to Orlando, Florida, when his checked baggage set off a security alarm.
TSA agents opened the luggage to discover parts to make a “military-grade rocket-propelled grenade launcher,” that turned out to be a replica.
.@TSA officers detected the unassembled parts of a military rocket propelled grenade launcher in a man’s checked bag at @FLYLVIA yesterday. When assembled, the launcher was determined to be non-functioning and the grenade an inert replica. (Thank goodness!) pic.twitter.com/hrBt5ECdpJ
Meanwhile, a man arrested in January 2017 at Lester B. Pearson International Airport in Ontario, Canada was fined $20,000 on February 20 for transporting seven undeclared test tubes containing deadly animal viruses (Peste des Petits Ruminants Virus, Newcastle Disease Virus, Duck Adenovirus 1, and Parainfluenza Virus 5).
Peste des Petits Ruminants (PPR) is a highly contagious viral disease that mainly affects sheep and goats. Heavy losses can be seen, especially in goats, with morbidity and mortality rates sometimes approaching 80 percent to 100 percent. At one time, PPR was thought to be restricted to the Middle East and limited areas of Africa and Asia.
Newcastle disease is caused by virulent strains of Newcastle disease virus (NDV), which causes substantial morbidity and mortality events worldwide in poultry. The virus strains can be differentiated as lentogenic, mesogenic, or velogenic based on a mean death time in chicken embryos.
Duck adenovirus 1 is a species of hemagglutinating adenovirus that’s been associated with egg drop syndrome.
Parainfluenza Virus 5 is a possible cause of severe respiratory disease in calves in China. It is an infectious respiratory disease that has been prevalent in weaning calves.
The Canadian government considered the viruses a “serious threat to animals,” requiring strict regulation over their transport.
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As the Brexit doomsday clock ticks ever closer to day zero, Tory Brexiteers and their allies in the DUP (the tiny Northern Irish party that props up May’s government) are facing an incredibly difficult decision. Should they finally relent in their opposition to Theresa May’s deal and effectively take the European Union’s word – or whatever assurances it might offer – that the “Irish Backstop” wouldn’t be permanent? Or, should they risk the possibility of a Brexit delay or – as May has repeatedly warned – the prospect of no Brexit at all?
After leaders of the ERG hinted earlier this month that they might be open to a compromise after months of staunchly opposing May’s deal, it’s looking like, after a week of negotiations between Michel Barnier (the chief EU negotiator) and Geoffrey Cox (May’s attorney general), that, once again, absolutely no movement has been achieved.
Despite a flood of headlines and updates about the talks, Cox wasn’t able to secure the assurances he’d been seeking – which would have, ideally, allowed him to change his legal advice on May’s deal (as it stands, according to Cox’s reading of the withdrawal text, the possibility of the UK being permanently trapped in the EU customs union, which the ERG fears would transform proud Britain into a “vassal state”, remains a possibility).
Negotiations are expected to continue through the weekend (and probably up until Tuesday, when the next meaningful vote on May’s Brexit plan is expected), but, if the past is any guide, it’s unlikely that a compromise will be reached before Tuesday.
Last time around, MPs rejected May’s deal by a historic 230 vote margin, the worst defeat for a British government since before the Second World War. If the EU doesn’t sweeten the deal, it’s very possible that May will face a second humiliating defeat.
Which brings us to next steps. If May’s deal is defeated, she has promised to hold a vote the following day on whether Parliament would support leaving the EU without a deal. If that, too, fails (which would be expected), May will hold a vote to gauge support for a Brexit delay. If the first two votes fail, but the final vote passes, a delay would likely be requested at the upcoming EU summit (the bloc would need to sign off, of course).
The pound weakened this week as traders were left in a uncomfortable – yet familiar – position: With less than three weeks until the March 29 ‘Brexit Day’, nobody has any idea what happens next.
Fortunately, Bloomberg has published a handy guide to walk us through a few scenarios (and what impact they might have on the market):
May prevails:
Negotiators are working through the weekend to try to find tweaks to the deal May negotiated last year to make it more acceptable to Parliament. Both sides are gloomy, but we’ve seen last-minute breakthroughs before. Whatever is agreed must convince the pro-Brexit faction of the Conservative Party and also the proudly obstinate Northern Irish lawmakers who prop up her government. If she pulls it off, markets will rally.
A ‘softer’ approach:
If the deal is rejected, the most likely next step is that members of Parliament start maneuvering to force the government into a softer Brexit policy that can win cross-party support. Labour leader Jeremy Corbyn has already been talking to backbench members of the Conservative Party who want to maintain close ties to the bloc. Norway Plus and the Customs Unionwill be back on the table. Markets will see this as moderately positive.
One last go:
If she’s defeated on Tuesday, the prime minister could be tempted to give lawmakers one more chance to back her deal — now that the prospect of an extension to Brexit day is before them. It’s not clear when she might do this — but it could be as soon as next week.
Just end it:
Members of Parliament are set to put forward amendments next week calling for a second referendum. Labour has come out in favor of a second vote — albeit with some reservations. There’s probably still not a majority in Parliament for a re-run, but that could change in the weeks ahead. May said on Friday the chances of another plebiscite have gone up since Labour changed its position. Expect her to keep playing that up as she tries to convince purists that her version of Brexit is better than the risk of none at all. Markets see a second referendum as positive.
Kick the can:
It’s just possible that no majority for any kind of Brexit emerges in Parliament. If that happens, Parliament remains gridlocked, the EU reluctantly agrees to a short extension to avoid the pain of no-deal, and in three months time we’re back to the cliff-edge. This is what Brexit hardliners are hoping for — that they will get another chance to force May to take the U.K. out of the bloc with no deal. Markets will slump if this starts to look likely.
Unless May’s deal passes, markets will be left to parse an increasingly uncertain future. Shrewd Wall Street analysts have warned in the past that, if the EU does decide to budge, concessions (a reopening of the withdrawal agreement) likely won’t be allowed until the very last minute (which, as we have pointed out before, would be the EU summit beginning on March 21). If it doesn’t it’s likely Brexit Day will be delayed by a few months. But the problem remains: Amid all of the political infighting, no alternative to May’s deal has emerged. And if Europe doesn’t concede, the possibility of the UK leaving without a deal would be impossible to rule out.
via ZeroHedge News https://ift.tt/2J5aJci Tyler Durden
How much longer will the middle class politely tolerate its own destruction?
A middle class that outnumbers the combined poor and aristocracy is a relatively new phenomenon, dating back to around 1900. The rise of the middle class was the result of Industrial Revolution capitalism. It has been one of the most significant and epochal developments in history, yet the intellectual reaction for the most part has been to either ignore it or treat it with disdain. Now the project to destroy the middle class is well under way, with unpredictable and uncontrollable consequences that promise to be just as epochal as its creation.
Intellectual condescension towards the middle class is so common it’s a cliché. What’s rare are attempts to go back in history and see things through the perspectives of that despised group and its progenitors, the poor.
In 1800, virtually everyone was poor, living under conditions of deprivation and grinding poverty. Even being wealthy was no picnic; present-day poverty-line Americans live better. Life expectancy was an estimated twenty-nine years. Farming, the occupation of most, was dangerous, backbreaking labor from dawn to dusk. Most of those so engaged eked out a tenuous subsistence. There was no electricity, no running water, primitive sanitation and health care, and none of the machinery, gadgets, and appliances we take for granted. Only a few wealthy poets who didn’t have to wrest a living from nature waxed euphoric about its “joys.”
As the nineteenth century progressed, primitive factories, mostly in cities, began producing goods of better quality, in more quantity, and at lower cost than had been possible by artisans handcrafting their wares. No doubt conditions in those factories were abysmal—long hours, pittance pay, child labor, dangerous and filthy conditions, and horrible accidents and injuries. All that has been well-chronicled and dramatized, but an important point gets overlooked. Bad as they were, the factories were a better option for those who worked in them than the farms from whence many of them came, or they would have stayed there.
Capitalism requires capital, and early industrialization provided profits to capitalize: more factories, further innovation, new inventions and industries, and eventually the astonishing burst of dynamic energy that became the Industrial Revolution. Each new generation of mines, factories, ships, trains, farms and other productive assets became less labor-intensive, produced higher average real wages, had lower percentages of child labor, and were less dangerous than their predecessors. Again, by present day standards most working conditions were still abysmal, but less so than what had preceded them. That was the relevant consideration for the millions of people who worked in Dickensian conditions:it was their best option, and better than anything they had previously known.
The nineteenth century produced more technological and scientific innovation that all the centuries before it combined. Societies don’t go from poor to rich overnight. However, real world conditions―opportunity, income, wealth, health, and overall quality of life―steadily improved. By 1900, life expectancy in the US was 46 years for males and 48 years for females, an unprecedented one-century increase.
Those who throw rocks at the Industrial Revolution, the period when America approached laissez faire capitalism, have to minimize or ignore one simple fact.
Millions of people braved the dangers of travel, the uncertainties of life in a new land, the difficulties of learning a new language, the prejudice and hostility they knew they would encounter, the daunting challenges of starting at the bottom, and the absence of government giveaways and freely chose to immigrate to the United States.
Sometimes the payoff was huge. Andrew Carnegie really did get off the boat with eleven cents in his pocket. Cyrus McCormack, John D. Rockefeller, Thomas Edison, Henry Ford and other success stories came from impoverished or modest backgrounds and made multimillion dollar fortunes. The self-made businessman became the American archetype, fueling countless aspirations.
The emergent middle class was a cohesive force for political stability. The immigrants passed their memories of what they had escaped to their children and grandchildren. They embraced the reality and the promise of America based on their own fruitful experience. Life was good and would get even better, why rock the boat? Few noticed the thunderhead on the horizon.
That thunderhead was hate, directed not at America’s flaws and weaknesses, but at its virtues and strengths. The sacrifice, hard work, thrift, and ingenuity that had lifted millions from poverty was condemned as selfishness, blind ambition, and greed. The middle class that didn’t exist a century ago was materialistic, anti-intellectual, and spiritually impoverished. The unprecedented wealth America was producing was wrong because it was unequally distributed, or the most philanthropic and charitable people in history weren’t giving enough away.
You can guess where the hostility came from: the intellectuals who found what they peddled commanded little attention or respect, and would-be rulers in a nation with little desire to be ruled. The desire for autonomy, to be left alone, to be free to make one’s own decisions and live one’s own life, are the benchmarks of well-adjusted normalcy. The desires to tell or force other people what to do are the opposite, wellsprings of hate which are, depending on their intensity and quality, neurotic, sociopathic, or psychopathic.
That the middle class is now fighting for its life reflects two intellectual failures.
In the late 1800s and early 1900s, the intellectuals, political class, and many of the tycoons were pressing for expanded government, the income tax, central banking, and American interventionism and imperialism. The truisms that any expansion of the government’s power and resources would only reduce the people’s liberty and be funded with money stolen from them was overwhelmed by what’s become the standard propaganda: coercion is necessary to address some risk, danger, or “unacceptable” condition. There were no prominent voices connecting the prevalent peace, prosperity, and optimism with the era’s unprecedented personal freedom, nor arguing their essential inseparability.
The other failure: most “average” Americans simply couldn’t comprehend or even conceive of the hatred directed against them. Statism, whatever its variations, is never about doing something for people, it’s about doing something to them. Even now, with virulent vitriol and hatred on full display, much of it is minimized or rationalized by people who should know better. The corruption of the “middle-grounders” may run deeper than the statists and the collectivists, who at least no longer try to hide their agenda and acknowledge that freedom cannot coexist with the unlimited governmental power they covet.
When somebody claims that your life is their property, they’re telling you that they have the right to do with it what they will, which includes killing you. All manner of statist belladonna reached full florescence in the twentieth century—socialism, communism, nazism, fascism, welfare statism, cronyism, kleptocracy, kakistocracy—and the murder, genocide, and war have been orders of magnitude greater than anything that preceded it.
You shall know them by their works. The thing that statism does best to people is kill them; the record is clear and unmistakable. Anyone now promoting more of the same is simply evil. Only unmitigated hatred accounts for the particular antipathy directed towards the middle class: their values, their prosperity, and their predominate race (white) and religion (Christianity).
The middle class being a relatively new phenomenon, nobody can say what the consequences of the all-out war against it will be. It is the bedrock of modern economies and its destruction will take out most of the developed world’s productive capacity and consumer markets. That doesn’t seem to bother the statists. How they plan to free themselves from the economies that sustain them is a question they ignore. It calls to mind Ayn Rand’s Atlas Shrugged observation: the deaths they desire the most are their own. That has to be the true definition of insanity. Truer even than Einstein’s: repeatedly doing the same thing and expecting a different result.
The notion that our rulers are insane has slipped loose from the alternative media where it was once confined. Certainly US foreign policy meets Einstein’s definition: repeated regime changes in the name of democracy promotion that promote only carnage and chaos, endlessly inconclusive interventions, war profiteering, terrorism, and intense hatred of the American people and its government around the world. Donald Trump questioned those repeated failures and that provided his margin of victory in 2016.
To this day nobody can explain the logic behind the bailouts during the last financial crisis and what ensued, the world’s central banks monetizing massive government debt and pushing interest rates below zero. The high and mighty pretend this is all normal, but for normal people buying a bond with a guaranteed loss is insane. Microscopic rates force them, against their better judgment, into a stock market that’s crashed twice since the turn of the century, decimating their savings, and now sits at historically sky-high valuations. Here is the “investment landscape” you’re supposed to embrace: lose money or put it on the pass line and hope the Wall Street roll of the dice doesn’t once again come up craps.
Keep spending money you don’t have and inevitably you’ll go broke. Keep making promises you can’t fulfill and inevitably you’ll break them. There are hundreds of trillions of dollars worth of claims on the future out there that have no chance of ever being redeemed, yet the pile continues to grow. The mathematical outcome is as straightforward and devastating as playing Russian roulette with all the chambers loaded.
Obamacare is the latest insane gift from the government that keeps on giving. It’s an obvious failure, but it’s a foaming-at-the mouth, murderous pit bull that from some deranged concept of mercy or an appalling lack of fortitude nobody will put out of its misery. Medical care stands in a long line of industries that malevolence masked as good intentions has destroyed.
As the middle class watches the America it once knew and cherished collapse, and comes to understand why, it realizes its head is on the chopping block. A bright middle-schooler can see that the Green New Deal will bring the economy to a shuddering stop and plunge many who have managed to escape so far into poverty. Yet the Democrats’ leading lights rush to praise the imaginary raiment of would-be empress Ocasio-Cortez.
The middle class has always aspired to better things—the American dream. Talk of 70 percent or higher tax rates and wealth taxes capitalizes on hatred of the rich, it’s open season. Why work and sacrifice to get rich if the government gets it all?
Take away middle class dreams and you may well be taking away the last thing that keeps them paying their taxes, observing the law, supporting the troops and police, in short, everything that from the vantage point of the ruling class, “keeps them in line.”
What began as a gentle squeeze a century ago has become python-like constriction. Government has drained economic vitality and shuttered opportunity as the once politically stable, prosperous, and optimistic middle class dwindles. A few still reach the upper echelon, but most are consigned to creeping poverty, blunting the economic consequences with credit and the personal consequences with cannabis, alcohol, opioids, pornography, and promiscuity. It’s only going to get worse as debt grows, massive unfunded medical and pension liabilities come due, taxes rise, economies shrink, and promises are broken.
The ruling class has backed the middle class into a corner. Shoving them into poverty and vanquishing their dreams amounts to an unprecedented and dangerous experiment. Aristocratic arrogance, condescension, exclusivity, and isolation add to the combustibility. Yet they remain steadfastly oblivious to the rising anger and the risks. They don’t even recognize the danger of billing the governments they control (or the global one they want to create) as the solution to all problems. Who’s going to get the blame when things fall apart?
The potentates may find their nuclear arsenals and well-armed militaries and police forces comforting. However, their experiment confronts unanswered questions. What if a substantial portion of the population has taken to the streets and far outnumbers the praetorians? What if praetorian sentiment is with the protestors and insurrectionists? Are the rulers really prepared to use tanks, heavy artillery, bombs, and even nuclear weapons on their own population? Will the people charged with pressing those buttons actually press them?
For America’s ruling class failing policies, looming insolvency, rising awareness via the alternative media, their own hypocrisy and corruption, political polarization, and a well-armed populace are a stairway to hell. What happens when the disaffected, many who will have nothing to lose, try to reclaim their lives and liberty and upend the political order that has roadblocked their pursuit of happiness?
Disaffection is a battalion, righteous moral certainty an army. The latter has moved the world and will do so again. Victor Hugo said that nothing is as powerful as an idea whose time has come. Here’s an idea so powerful yet so simple it fits on a bumper sticker: Fight for your life. It’s megatons of TNT, the fuze has run, and the explosions have started. There’s no way to predict or control the consequences. The only certainty is that anyone who thinks they can do so will be proven disastrously wrong.
via ZeroHedge News https://ift.tt/2tZIuRP Tyler Durden
Exactly ten years ago on March 9, 2009, just as rumors were swirling that the Fed would unleash and expand its QE1 program by $1 trillion (confirmed on March 18, 2009), the current “bull market” began and since then, despite coming within inches of ending twice once in 2011 and again on December 24, 2018 when a last minute buying surge prevented a 20% peak to trough drawdown, the S&P500 has climbed by 306% in price, or 15.2% annualized, while including dividends, the index has generated a total return of 401% (17.5% annualized), ranking in the 94th percentile of 10-year annualized returns since 1880
Curiously, despite the record duration of the bull market, which was made possible largely thanks to two key catalysts: an unprecedented expansion of central bank balance sheets which bought over $15 trillion in assets in the past decade, as well as trillions in stock buybacks, the S&P 500’s return including dividends trails all but one of the 12 bull runs since the Great Depression. In fact, according to Bloomberg, along with the post dot com bubble advance of 2002-2007, it’s one of only two cycles that hasn’t scored annualized returns of 20 percent or more.
While the length of the “bull market” is staggering, Bloomberg makes the case that depending on how one looks at it, the past 10 years have been relatively underachieving as far as bull markets go: at its all-time high reached in September, the S&P 500 stood roughly 80% above its most recent peak, in October 2007. While certainly impressive, it’s far from the biggest, as during three other cycles – 1949-1956, 1982-1987, 1990-2000, the bull run didn’t stop until share prices had doubled from their previous top.
“When you ascend far enough, the air gets thin, as I am finding out as I climb stairs in Colorado,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.
Meanwhile, as noted above, the rally nearly ended on two occasions when it just barely missed the cutoff of a -20% drawdown that denotes the end of a bull market. As Goldman’s David Kostin notes, at one point in 2011, the S&P 500 had dropped 19.4% below its high. More recently, on December 24, 2018 the S&P traded 19.8% below the September all-time high, having slid below 20% intraday and only a surprising late day bid preserved the rally… just as Steven Mnuchin was calling the Plunge Protection Team. For now, following the torrid rebound in January and February, the bull marches precariously on, with a realized volatility of 16.0 since 2009, in line with the 50-year median of 16.1.
So for those curious what trillions in central bank purchases and buybacks can do to a “bull market”, here are some stats courtesy of Goldman Sachs:
US stocks have significantly outperformed global equities during the past 10 years. Asia-Pacific (MXAPJ, 10% annualized price return), Europe (STOXX 600, 9%), Japan (TOPIX, 9%), and broad Emerging Markets (MSCI EM, 8%) all trailed the S&P 500. The Russell 2000 index of small-cap US equites fared best, returning 16% annualized since March 2009. While asset prices rose, the real economy expanded at a more modest pace with annualized US nominal GDP growth of 4% during the past decade. S&P 500 sales increased at a similar pace (3%) while margin expansion helped drive 8% EPS growth. Home prices rose at an annualized rate of 3% since the equity market low.
Earnings drive stocks over time. Profit growth accounted for nearly 75% of the 10-year climb in the S&P 500 index as trailing EPS rose by 140% from $67 at the market low to $161 during the past 12 months. Revenues increased by 43% and contributed 22% of the index gain. Corporate profit margins have expanded by nearly 500 bp from 7.3% at the low to the current all-time high of 12.2%, contributing 28% to the index rise. Only 19% of the S&P 500 index change since 2009 stemmed from expansion in forward P/E multiple (10x to 16x).
Which sectors and companies generated the bulk of the returns:
Information Technology contributed 22% of the index-level return during the past decade. Info Tech earnings have nearly tripled since the cycle low, driving 75% of the sector’s 10-year return. Sales growth accounted for more than half of the Tech earnings growth with margin expansion contributing the balance.
Financials was the second-largest contributor to the S&P 500 bull market, accounting for 15% of the index return since 2009. Nearly all of the Financials return came from profit growth rather than valuation expansion.
Energy is the only sector where the level of earnings per share actually declined (-35%). Part of the reason for the drop in EPS is the high starting point for WTI oil prices. Oil prices averaged $92/barrel during the 12 months leading up to March 2009 (first rising above $140/barrel and then sliding below $40). Fast forward, and during the past year WTI has averaged $63/barrel. In aggregate, the Energy sector accounted for just 3% of the index-level return during the past decade – similar to contributions from the Materials and Utilities sectors.
At the company level, just ten stocks accounted for nearly 25% of the 10-year index return.
AAPL shares generated a 32% annualized total return during the past 10 years and single-handedly accounted for 20 percentage points of the S&P 500 total return. Powered by the iPhone, AAPL sales rocketed upwards at a 23% annualized rate and EPS surged by 32% annually for the past decade. With such dramatic growth in the top- and bottom-line, the slip in forward P/E multiple from 15.2x to 14.3x hardly mattered.
Microsoft is the opposite story. In delivering a 25% annualized total return during the past decade, MSFT shares were the second-largest contributor to the S&P 500 index return since 2009, accounting for 17 percentage points of the index return. While MSFT sales and EPS grew at an annualized rate of 7% and 9%, respectively, during the last decade, the forward P/E multiple expanded from 8.0x to 23.0x. AMZN (39% annualized total return and 9 pp of S&P 500 index), JPM (23% and 7 pp), and JNJ (15% and 7 pp) round out the top five index return contributors.
While profits rose by an impressive 140% in the past decade, the aggregate S&P 500 forward P/E multiple has also expanded from 10x to 16x (+58%) this cycle and ranks at the 74th percentile vs. history. However, as Goldman notes, a defining characteristic of the current bull market has been extraordinarily low bond yields. The yield gap, which compares the S&P 500 earnings yield with the 10-year US Treasury yield, currently stands at 350 bp (6.1% earnings yield vs. 2.6% note yields), compared with the 40-year average of 250 bp and ranking in just the 29th percentile. The yield gap measured 490 bp in March 2009 (13th percentile).
As an aside, Goldman now forecasts that S&P 500 returns “will be modest in the near-term” and recommend investors focus on relative value and idiosyncratic opportunities. The positive impact on equity valuations from a patient Fed unlikely to tighten the funds rate for the rest of the year is offset by the negative impact of an anticipated recession in 1Q aggregate S&P 500 EPS. As a result, Goldman’s forecast is that the S&P 500 will close mid-year at 2750, unchanged from today, however, it then sees the S&P rising by 9% to 3000 by year-end 2019, even as the firm admits that mounting pressures from wage inflation and other input costs will pressure margins, making further expansion from currently all-time high margins unlikely. As a result, growth in EPS will be driven entirely by top-line sales. Equity valuations will remain well below their recent January 2018 highs.
* * *
A few final observations on the current rally in context: while of extreme duration if of relatively shallow slope, in February, the S&P 500’s return over 10 years crossed 350%, a threshold that according to New Davis Research has been breached only three other times: in December 1952, February 1987 and October 1997. And just like the current cycle, those instances all followed big market crashes and occurred within a prolonged uptrend.
So is the current geriatric bull almost over? According to at least one indicator, it may have even more to go – after the initial breakout above the threshold, stocks continued to advance, with the S&P 500 rising an average of 58% before suffering a bear market. There is, however, one major difference between now and those previous bull markets: as Bloomberg notes, what’s different this time is the catatonic economic backdrop, as US GDP expanded at an average rate of only 1.8% over the past decade, compared with 4.3% in the 1950s and 3.2% in the 1990s. And with GDP expected to decline substantially in 2019 and even more in 2020 once the recent fiscal boost becomes a headwind, the question is can the Fed do everything in its power and push on a string some more just to extend the duration of the current record long bull market by a few more quarters, just as it has for the past 10 years.
via ZeroHedge News https://ift.tt/2SUdA7F Tyler Durden
Brussels plans to resettle migrants across the EU, but Hungary will have none of it.
The E.U. is set to convene to discuss mandatory resettlement quotas. Hungarian Prime Minister Victor Orbán was clear in denouncing this, and has decided to hold a popular referendum on the quota system.
As part of the referendum preparations, the Hungarian government recently initiated a public information campaign aimed at informing the populace about the globalist agenda of the E.U. leadership, stating that “everyone has the right to know what Brussels is planning.” The campaign did not go unnoticed. The E.U. responded with a counter-campaign, called “Facts about the EU’s migration policy,” which declared that “you also have a right to know what is fact and what is fiction.”
It is no exaggeration to say that a severe level of distrust reigns in many East-European countries with regards to the E.U., and Hungary has taken a leadership role in challenging the open border policies. Hungary’s Secretary for Diplomacy and Relations, Dr. Zoltán Kovács, admonished the E.U.’s response, saying their own facts refute the claims.
The E.U.’s memo claims there are no migrant quotas, but also says that “it could be expected of every member state to show solidarity with the others.” To “structure” this solidarity, they are working on a resettlement system, and another document from 2018 described how this “will help reduce irregular migration by ensuring safe and legal alternatives. It will replace the current ad-hoc schemes and set EU-wide two-year plans for resettling genuine refugees.” This quote echoes the wording of the U.N.’s Global Compact for Migration, which would flood the West with 250 million migrants.
Kovács clarified: “Brussels is not focused on stopping migration. In fact, they want to legalize it. Europe’s citizens have a right to know.”
Orbán elaborated on the content of the information campaign at a press conference: “[W]e have assigned top priority to protecting the borders and halting the masses of migrants. In other words, we declared that they must be stopped, the external borders must be protected, and the terms of the Schengen Agreement must be fully observed by everyone.”
Kovács explained that “the government’s position is that no European body has the authority to impose the compulsory settlement of non-Hungarian citizens in Hungary without the consent of the Hungarian people.”
Dr. Zoltán Kovács
Hungary Fights
This power struggle shows that, while the globalists have not given up their dream of turning Europe into a continent of migrants, they are meeting fierce resistance from those countries with the centralized oppressive power of the Soviet Union fresh in memory.
Paradoxically, the iron curtain that held Eastern Europe hostage to the communists in their own countries for 70 years also protected them from the woke propaganda with which the Marxist professors in Western universities have poisoned the minds of generations of students. In the communist countries, the oppression was blunt and uncloaked for all to see. No pretense was needed.
This has made these survivors of oppression far more resilient in withstanding the doctrine of political correctness that is designed to strip mine people’s empathy. Hungary is an excellent example of such a willingness to fight to keep their hard-earned freedom.
via ZeroHedge News https://ift.tt/2tWLYof Tyler Durden
The $1 trillion sovereign wealth fund of Europe’s biggest energy producer is hedging against a scenario where oil prices never return to their levels from 2014.
In a statement released Friday, the Norwegian sovereign wealth fund, which derives its income from the country’s oil and gas revenues, said it planned to sell shares of pure-play exploration companies, while holding on to shares of the biggest integrated producers. The Norwegian government approved the plan on Friday after a year of deliberation.
It calls for shares of 134 companies classified as exploration and production companies to be removed from the FTSE Russell. Shares of bigger oil firms, like Royal Dutch Shell and Exxon Mobil, will remain.
“The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline,” Finance Minister Siv Jensen said in a statement. “Hence, it is more accurate to sell companies which explore and produce oil and gas, rather than selling a broadly diversified energy sector.”
Ironically, the proposal was hailed by climate activists in 2017 as a sign that an increasingly environmentally conscious Norway was looking beyond the carbon-based energy industry.
News that the plan had finally been approved sent shares of energy companies reeling…
via ZeroHedge News https://ift.tt/2J2SCns Tyler Durden
While the Zircon hypersonic cruise missile has not attracted the same level of media attention as the strategic Avangard re-entry vehicle or even the air-launched Kinzhal aeroballistic missile, it nevertheless represents an important advance in military technology and represents the state-of-the-art of Russian technologies. It promises to maintain and even expand Russia’s conventional deterrence through its high guarantee of effective retaliatory capability even against the most advanced anti-air and anti-missile defenses.
The secrecy surrounding the 3M22 Zircon, to the point of there existing no official images of the weapon, is remarkable and reminds one of the careful effort to conceal the true nature of the P-700 Granit heavy anti-ship missile, specifically its air-breathing ramjet propulsion.
It is also indicative of the importance attached to this weapon by the Russian government. Zircon has already been assigned a NATO reporting designation of SS-N-33, indicating that the alliance is treating the reports of its development and testing fairly seriously. As well it should, given that the weapon system is being developed by the world-famous NPO Mashinostroyeniya know for, among other things, the aforementioned Granit and the Oniks/Yakhont cruise missile boasting ramjet propulsion, top speeds several times the speed of sound, and the capability of striking land and naval targets. While the Granit was never used in combat, Oniks has already proved itself in Syria, where it was used to destroy extremist high-value targets with high precision and played an important role in deterring NATO strikes against Syria by threatening its naval assets in the Mediterranean.
While the Oniks is still a potent weapon that poses an extremely difficult challenge for any point-defense system due to its small size and high speed, the nature of the offense-defense technological race means that its successor in the form of Zircon is already under development and will likely enter service within the next few years, though according to some officials it already forms part of Russia’s arsenal. It is entirely possible that while the weapon is still undergoing development and testing, some missiles are already being carried by naval vessels on an experimental basis, in the same way the air-launched Kinzhal aeroballistic missile was deployed while still undergoing evaluation.
The reports that the Zircon is to be launched from the same 3S14 vertical launchers that are used for the Oniks indicate the two missiles are in the same weight and size class, with comparable range and payload characteristics. The one advantage the Zircon will have over the Oniks is the speed, which various sources estimate at between Mach 6 and Mach 9, a figure that may well depend on the missile’s flight altitude. If a low-altitude trajectory is adopted, on the one hand the dense layers of the atmosphere would reduce the speed considerably while on the other reducing reaction time by allowing the missile to clear the radar horizon relatively close to its target. A high-altitude cruise at 30-40km would enable it to accelerate to maximum velocity likely approaching that of a short-range ballistic missile and attack its target in a steep dive. While the high-altitude approach would provide the adversary with greater opportunity to detect the missile whose heat alone would make it difficult to conceal, it still would be a difficult weapon to intercept, particularly since most weapons sent against it would be considerably slower. It is not clear whether the Zircon is capable of high-g evasive maneuvers. If it is, that would increase its resistance to interception even more.
The differences between high and low flight trajectories likely account for the different cited maximum ranges for the weapon. While some sources list its range as only 400km, President Putin’s recent address included the claim the weapon has effective range in excess of 1,000km. Moreover, should an air-launched variant of the Zircon be developed, which is rather likely considering the existence of sea-, land-, and air-launched versions of the Oniks, its maximum range should be well in excess of 1,000km, particularly if the launching aircraft is flying at high altitude and at supersonic speed.
Once operational, the naval variant of the Zircon will be deployed on all ships currently capable of carrying the Kalibr and Oniks missile systems, from 800 ton missile corvettes to frigates and even ships currently armed with the large Soviet-era Granit anti-ship missiles, namely the nuclear-powered missile cruisers and cruise missile submarines. It appears that, as in the case of Oniks, the primary mission is anti-ship, with a combination of inertial, satellite, and active radar guidance, with a secondary land-attack role. On account of its rather shorter range and smaller payload, it is unlikely to displace Kalibr as the naval land-attack weapon of choice. While there are reports that the Zircon could be used to target US command and control facilities on the Atlantic coast, the weapon’s range means the launching submarine would have to cruise uncomfortably close to US coasts and therefore risk detection and destruction in order to bring its missiles to bear. It is doubtful the Zircon would be the sole or even the main weapon used for conventional strikes against land targets in such a scenario, and there are no indications it is intended to completely or even partially replace the Kalibr.
However, the Zircon would have one major advantage over the Kalibr in the land-attack role, namely its potential ability to destroy underground targets due to its extremely high speed, if equipped with an appropriate “bunker buster” warhead and launched on a plunging trajectory against its target. Kalibr does not have the ability to defeat such heavily protected targets, and while Kinzhal potentially does, it is an air-launched weapon only. Thus the Zircon promises to not only preserve the competitiveness and viability of Russia’s anti-ship weapon systems but also provide an important and so far lacking niche capability.
via ZeroHedge News https://ift.tt/2H9Mo3c Tyler Durden
As backlash against America’s painkiller addiction grows, gedge fund Hildene Capital Management has cut ties with the billionaire family that controls the OxyContin maker Purdue Pharma. According to The Wall Street Journal, Hildene fund manager Brett Jefferson forced the Sackler family who is invested in the $10 billion fund to start redeeming their investments.
“An opioid-related tragedy affected someone with a personal relationship to me and other members of Hildene,” Jefferson said in a statement, which he said occurred in 2017. At the time, the Stamford, Conn. hedge fund donated money to an organization fighting the opioid epidemic and has since contemplated ending the firm’s relationship with the Sacklers, he wrote.
“Last year the weight on my conscience led me to terminate the relationship and initiate the redemption procedure,” Jefferson wrote.
Hildene joins a long list of universities, museums, and nonprofits, including the New York Academy of Sciences and Columbia University, that have all questioned their relationship with the Family.
The Sacklers, who control Purdue which is considering filing for bankruptcy to limit its mounting legal liabilities, have come under immense pressure amid hundreds of pages of courts documents released as part of lawsuits filed by Connecticut and Massachusetts.
Connecticut and Massachusetts are the first two states to sue Purdue and Sackler family members simultaneously. Their lawsuit alleges that eight Sacklers sparked the opioid crisis with misleading marketing of OxyContin in the late 1990s, which allowed Purdue and the family to reap billions of dollars from flooding every state with highly addictive prescription drugs.
Purdue paid $4 billion to the Sackler family between 2008 and 2016, according to the Massachusetts attorney general’s lawsuit.
The legal scrutiny of the Sacklers is making their family investment operations in hedge funds public knowledge.
Some family members “have financial interests, directly or indirectly, in: Airbnb Inc.; Honest Co.; ski resort operators Vail Resorts Inc. and Peak Resorts; the Smith restaurant chain in New York; the luxury Amanyara resort in Turks and Caicos; and apartment complexes and hotel developments throughout the U.S.,” said the Journal. Their investments also include a biomaterials company Silk Therapeutics Inc. and a $100 stake in the firm Balter Capital Management.
The Journal said hedge funds that count the Sacklers among their clients declined to comment or didn’t respond to requests for comment.
While some members of the Sackler family directly control Purdue, not all family members are involved in the company. Family members have a wide range of investments in hedge funds and other businesses.
Since the Sascklers launched OxyContin in the late 1990s, deaths involving prescription and illegal opioids have quadrupled from 2.9 per 100,000 in 1999 to 13.3 per 100,000 in 2016, according to the Centers for Disease Control and Prevention.
There are 36 states and 1,600 cities and counties that have filed lawsuits against Purdue, and four members of the family have been asked to testify this month as part of cases against Purdue in Ohio and Oklahoma.
Richard, Kathe, Mortimer D.A. and Jonathan Sackler, all members of Purdue’s controlling family and former board members of the company, are scheduled to sit for depositions beginning this week. The interviews are likely to further probe family members’ roles in the company and marketing of its drugs. Mortimer D.A. and Jonathan are testifying in a case brought by Oklahoma’s attorney general scheduled for trial in May.
The legal scrutiny of the Sacklers is highlighting their family investment operations, which are some of the most sophisticated in the U.S. Branches of it are longtime investors in hedge funds, including successful early stakes in Perry Capital, which told clients in 2016 it would close, and Lone Pine Capital.
Understandably, Purdue and the Sacklers have tried to avoid scrutiny for their role in sparking the crisis as state and federal lawsuits mount. Now the family’s multibillion-dollar investment operations and charitable efforts are also facing a backlash from the finance and academic communities in the Northeastern US, which are finding themselves under pressure for their association to the Sacklers.
Some family members also have financial interests, directly or indirectly, in: Airbnb Inc.; Honest Co.; ski resort operators Vail Resorts Inc. and Peak Resorts; the Smith restaurant chain in New York; the luxury Amanyara resort in Turks and Caicos; and apartment complexes and hotel developments throughout the U.S. They have invested in biomaterials company Silk Therapeutics Inc. and backed with $100 million Boston investment firm Balter Capital Management, according to people familiar with the matter.
The family office for Raymond Sackler’s son Richard is named Summer Road LLC for a street near the Alta ski resort in Utah, near where a branch of the family owns a home that is the site of family gatherings. Summer Road, run by Richard’s son David Sackler, a former hedge-fund manager himself, has recruited nearly a dozen traders in recent years, many of whom focus on quantitative trading.
As the WSJ notes, an entity called Kokino LLC invests the wealth of Jonathan Sackler and Kokino’s employees. Kokino operates out of the same building in Stamford that houses Purdue’s headquarters, along with other investment firms with connections to the Sacklers. Purdue’s HQ in Stamford has become a site of protests by recovered addicts and people who said they had relatives who died of opioid overdoses.
Brian Olson, a co-founder of hedge-fund giant Viking Global, heads Kokino. Kokino as of late last year invested in roughly two dozen hedge funds, said a person familiar with Kokino’s operations. People familiar with Kokino said its investments include DeepCurrents Investment Group and Sunriver Management, which is housed in the same building as Purdue.
Jonathan Sackler is also an investor in Brookside Equity Partners and Soundview Real Estate Partners. Their portfolios include Airbnb, the Honest Company, Lyft, apartment and hotel developments throughout the U.S. and New York food hall operator UrbanSpace, according to their websites and people familiar with the matter.
As noted previously, Purdue is contemplating filing for bankruptcy amid the barrage of lawsuits.
via ZeroHedge News https://ift.tt/2TFBRmd Tyler Durden
