US-Supported Syrian White Helmets Involved with War Crimes Committed by Rebel Groups

This article was co-authored with Disobedient Media editor Cassandra Hasenstein

This article contains graphic images of violence, reader caution is advised

Abstract:

The Syrian White Helmets, or Syria Civil Defense Force are lauded by mainstream news sources for their humanitarian work during the Syrian Civil War. But research by Disobedient Media reveals that the White Helmets are an organization supported by the United States for the purpose of regime change in Syria. We have also directly tied this group to varying levels of involvement with war crimes committed by rebel groups in Syria as well as uncovered evidence of their potential involvement in an effort to intentionally use millions of residents in the besieged city of Aleppo as bargaining chips with the Syrian government.

I. The White Helmets are Funded by the United States

The White Helmets are described by media sources such as Time as being “ordinary Syrians” who simply wanted to band together and help mitigate the damage caused by Assad’s Syrian government forces.

This could not be further from the truth. The Syrian White Helmets are an organization funded by the United States with the intention of using the group as part of America’s wider objective of forcing regime change in Syria.

The Syrian Civil Defense Force is funded in part by United States Agency for International Development (USAID). Included here are two links showing contracts awarded by USAID to Chemonics International Inc. (DBA Chemonics). The first award was in the sum of $111.2 million and has a Period of Performance (POP) from January 2013 to June 2017. It states that the purpose of the award will be to use the funds for managing a “quick-response mechanism supporting activities that pursue a peaceful transition to a democratic and stable Syria.” The second was in the sum of $57.4 million and has a POP from August 2015 to August 2020. This award was designated to be used in the “Syria Regional Program II” which is a part of the Support Which Implements Fast Transitions IV (SWIFT IV) program.

This funding was used, if not entirely, then in part to finance the White Helmets. The Syrian Civil Defense Force website lists Chemonics as its primary supporter alongside NGO Mayday Rescue, who operate out of offices in Turkey, Jordan and Dubai.

II. The White Helmets Were Involved With Depriving Five Million Civilians of Water Supplies in Aleppo

On December 31st, Jordanian news source Al-Bawaba reported that ISIS had shut down two pumping stations on the Euphrates River to leave over five million residents of Aleppo without water. The reports appear to have originated from Iranian news source Press TV on the same day. The shutdown of water supplies to Aleppo appears to be an effort on the part of rebel groups to strike back at the Syrian government following territorial losses over the past month and came on the heels of reports that other rebel groups had similarly deprived civilians in Damascus of water for weeks.

On December 3rd, a demand letter from rebels near the city of Aleppo emerged on several Twitter accounts:

Twitter Post 1

Twitter Post 2

A scan of the demand letter can be seen here:

In the letter, rebel groups stated that they would allow teams to restore the water supply to Aleppo if the Syrian Army and Hezbollah agreed to cease their assault on rebel held positions around the city and allow an international team of observers to monitor the ceasefire.

What made this letter truly significant was the fact that one of the signatories to the document was a representative of the White Helmets:

A quick reference to the Syrian Civil Defense Force website reveals the exact same logo as the one which appears in the letter:

This document indicates that the White Helmets are playing a troubling role in assisting rebel groups commit war crimes against civilians. This would hardly match the stereotype of being the purely humanitarian group the Western press loves to portray them as.

III. The White Helmets Have a Troubling Nexus to War Crimes and Members Often Appear to Actually be Rebel Combatants

The embarrassing revelation that the White Helmets participated in the deprivation of water supplies to civilians in Aleppo comes on the heels of reports that the White Helmets were present at the scene of extra judicial killings and their that members are allegedly involved with various rebel military groups.

On May 5th, 2015, the Al-Qaeda affiliated group Jabhat al-Nusra committed an extrajudicial killing of a prisoner, which was filmed for propaganda purposes. In the video, members of the White Helmets are clearly seen present at the scene of the execution helping to remove the body. They did not appear to make any effort to prevent the killing. Al-Nusra’s decision to kill their prisoner was a clear violation of 75 U.N.T.S. 135 of the Geneva Convention on Treatment of Prisoners of War, and at worst an outright war crime were the victim a civilian. Images of the execution video may be seen here, though the actual footage is too graphic to publish:

The damning revelations of the video forced Syria Civil Defense to put out a now-deleted statement on the incident admitting that their team was present during the execution and stating that they condemned the killing of civilians despite the fact that their members did not make attempts to protest the killing at the scene.

Despite their statement claiming that they do not support the murder of civilians, there are a number of videos circulating online where members of the White Helmets openly express support for al-Nusra and other mujahedeen extremist groups who operate in Syria:

Syrian White Helmet expressing support for mujahedeen operating in Syria

Syrian White Helmet celebrating the al-Nusra capture of Jisr al-Shughur, Syria

There are also a number of images circulating online which appear to show that members of the Syria Civil Defense Force are also members of various rebel military groups in Syria:

Here a screenshot from a video run by Al Jazeera shows a White Helmet member next to a black jihadist flag:

The involvement of the White Helmets in assisting rebel groups to cut water supplies to civilians in Aleppo, their failure to take steps to protest or prevent murders of prisoners of war and civilians in Syria, and the alleged involvement of their members with various rebel groups raises questions about the true nature and purpose of the organization. More broadly, the fact that the Syria Civil Defense Force is backed financially by the United States casts a cloud over the ethics and overall goals of American foreign policy objectives in the Middle East.

This article was originally posted at http://ift.tt/2joxaf2

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Obama Makes Incredible Admission About WikiLeaks In Final Press Conference

Submitted by Alice Salles via TheAntiMedia.org,

President Barack Obama’s last press conference was a success, but only if you consider journalistic incompetence worthy of praise.

During the one-hour affair, Obama answered questions ranging from the commutation of whistleblower Chelsea Manning’s sentence to personal queries concerning his and First Lady Michelle Obama’s approach when talking to their daughters about the 2016 election — not quite a hard-hitting last inquiry for an outgoing president who, as the Los Angeles Times recently noted, managed to keep U.S. military forces “at war for all eight years of [his] tenure.”

But despite the media’s toothless strategy — showing the established press doesn’t understand its own role in a free society — the outgoing president made at least one admission most of the media has also ignored.

Around the eight-minute mark of the press conference, Obama says he hasn’t “commented on WikiLeaks generally,” and that the “conclusions of the intelligence community with respect to the Russian hacking were not conclusive as to whether WikiLeaks was witting or not in being the conduit through which we heard about the [Democratic National Committee] DNC e-mails that were leaked.”

To Craig Murray, an author, broadcaster, and human rights activist, Obama’s comment clarified that the U.S. government hasno evidence of how WikiLeaks got the DNC material.”

Obama’s statement is important, Murray continues, because itundermines the stream of completely evidence-free nonsense that has been emerging from the [U.S.] intelligence services this last two months, in which a series of suppositions have been strung together to make unfounded assertions that have been repeated again and again in the mainstream media.”

Referring to the emails “that were leaked” and not the servers that were hacked, Murray adds, Obama appears to agree with several experts on this subject, making it clear the entire ordeal revolving around the alleged Russian interference in the 2016 presidential election is but a smokescreen.

I have been repeating that this was a leak, not a hack, until I am blue in the face,” Murray added. But he isn’t the only one. William Binney, a whistleblower who previously worked as Technical Director of the National Security Agency (NSA), has also stated this incident wasn’t a hack. It was a leak.

If it had been a hack, Binney said, the NSA would be able to provide the public with details regarding the actual attack. But from the reports presented so far, that’s clearly not the case.

Adding that Obama’s reference to the leaked material “appears very natural, fluent and unforced,” Murray celebrates, saying that it “is good to have the truth finally told.”

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You Can’t Resist Trump by Closing Your Eyes

I have serious concerns about a Trump Presidency. I’ve laid these out repeatedly in the past, but to summarize, they center around his authoritarian nature, a disregard for civil liberties, and lastly the fact that many of the people he has surrounded himself with posses an ideology which runs completely counter to the populist message he espouses. As I warned back on November 9th, in the post Americans Roll the Dice With President Donald Trump:

Trump will be a failure unless he brings the right people into his inner circle. This is of the utmost importance. Indeed, I knew for certain Obama was a total fraud the moment he appointed Larry Summers and Timothy Geithner to key positions within his administration. This is the area I think Trump is most vulnerable to making some very big mistakes.

Irrespective of my serious concerns, I desperately want Trump to succeed. America needs him to succeed. I’m confident that Trump will never read a single word of this, but it’s also possible someone with access to him will. If so, please consider my observations. The Republic depends on him unifying the people and helping to foster an environment in which every American has a opportunity for life, liberty and the pursuit of happiness.

I’ve been very disappointed with a large number of Trump’s cabinet picks, and I think the people he has surrounded himself with in general will be a hindrance to populist polices that can help the American public. That said, I acknowledge he hasn’t actually done anything yet as President, so I’ll reserve further judgment for now.

Going forward, I will applaud Trump when he takes action I believe to be in the best interests of the people, and I will critique him when he does the opposite. This is what every thinking American should do, but I’m not delusional enough to expect it. I understand the inherent human desire to be tribal, attach yourself to a group and cheerlead your team. Unfortunate as that may be, it’s still very much a part of the world we live in.

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The Man Who Called The Last Bond Bear Market 40 Years Ago Says “Buy Bonds”

74-year-old bond guru Lacy Hunt is among a rare breed in finance today: people who actually traded during a period when bonds continuously lost value. As a young bond manager coming of age during the Great Inflation and Richard Nixon’s wage and price controls, Bloomberg reports that Hunt saw the bear market in bonds coming in the late 1970s, and made a fortune for his clients. Today, as hints of inflation start to bubble and calling the next bear market becomes the industry’s favorite pastime, Hunt says no, "I’m still long bonds, especially the long-end."

Hoisington Investment Management’s Hunt shrugs it off and says “it’s just more of the same.”

Using an out of fashion metric known as the velocity of money, the Austin, Texas-based economist says he’s convinced the rout since the election of Donald Trump is just a bump in the road for an extended rally.

The velocity is the rate at which money circulates in the economy and is usually measured as a ratio of nominal gross domestic product over the total supply. In other words, it measures how well an economy is able to generate transactions, and in turn growth, with an incremental increase of money in the financial system.

The problem is money velocity in the U.S. (as measured by M2) has fallen to a record-low of 1.44, meaning every dollar spent circulates only 1.44 times in the economy, down from over 2 times at the peak in 1997. To Hunt and other adherents, that shows even after years of unprecedented money printing by the Federal Reserve, inflation will remain subdued and elusive, largely because the private sector has chosen to hoard, and not spend, the money in the years after the financial crisis.

 "When debt is at high levels and increasingly counterproductive, the most important lesson of economic history is that the velocity of money falls," said Hunt said, who helps manage $3.6 billion in assets.

 

"I’m still long bonds, especially the long-end," the part of the yield curve that’s the most sensitive to rising inflation.

 

The $308 million Wasatch-Hoisington U.S. Treasury fund gives reason to listen to Hunt. The fund has outperformed over 90 percent of its peers in the past three and five years, and has returned 1.7 percent this year.

As Bloomberg notes, however, Hunt isn’t the only one seeing the record-low pace as an ominous sign.

The fact that money velocity declined rapidly during years of near-zero interest rates may signal aggressive monetary easing actually led to deflation instead of inflation, economists at the St. Louis Fed wrote back in 2014.

 

"In this regard, the unconventional monetary policy has reinforced the recession by stimulating the private sector’s money demand through pursuing an excessively low interest rate policy," economists Yi Wen and Maria A. Arias wrote.

 

"I know I’m the minority here,” Hunt said. “I’m just trying to see the world as I think it should be seen.”

And bearing in mind that the world and their pet rabbit is short Treasuries..

Hunt may be more right than he knows.

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New President, New World

Submitted by Patrick Buchanan via Buchanan.og,

“Don’t Make Any Sudden Moves” is the advice offered to the new president by Richard Haass of the Council on Foreign Relations, which has not traditionally been known as a beer hall of populist beliefs.

Haass meant the president should bring his National Security Council together to anticipate the consequences before tearing up the Iran nuclear deal, moving the U.S. embassy to Jerusalem or shooting down a missile being tested by Kim Jong Un.

In arguing against rash action, Haass is correct.

Where the CFR and the establishment are wrong, and Donald Trump is right, however, is in recognizing the new world we have entered.

The old order is passing away. Treaties and alliances dating from the Cold War are ceasing to be relevant and cannot long be sustained.

Economic patriotism and ethnonationalism, personified by Trump, seem everywhere ascendant. Transnationalism is yielding to tribalism.

The greater danger for President Trump is that the movement he led will be abandoned, its hopes dashed, and the agenda that Trump rejected and routed will be reimposed by a Republican Establishment and its collaborators in politics and the press.

Again, it was Trump who read the nation right, which is why he is taking the oath today.

The existential threat to the West no longer comes from the East, from a Russian army crashing through Poland and Germany and driving for the Elbe and Fulda Gap.

The existential threat to the West comes, instead, from the South.

The billion-plus peoples of the Maghreb, Middle East and sub-Sahara, whose numbers are exploding, are moving inexorably toward the Med, coming to occupy the empty places left by an aging and dying Europe, all of whose native-born populations steadily shrink.

American’s bleeding border is what concerns Americans, not the borders of Estonia, South Korea, Kuwait or the South China Sea.

When Trump calls NATO “obsolete,” he is saying that the great threat to the West is not Putin’s recapture of a Crimea that belonged to Russia for 150 years. And if the price of peace is getting out of Russia’s face and Russia’s space, maybe we should pay it.

George Kennan himself, the architect of Cold War containment of Stalin’s Russia, admonished us not to move NATO to Russia’s border.

Of Brexit, the British decision to leave the EU, Trump said this week, “People, countries want their own identity and the U.K. wanted its own identity … so if you ask me, I believe others will leave.”

Is he not right? Is it so shocking to hear a transparent truth?

How could Europe’s elites not see the populist forces rising? The European peoples wished to regain their lost sovereignty and national identity, and they were willing to pay a price to achieve it.

Apparently, the Davos crowd cannot comprehend people who believe there are more important things than wealth.

Yet while President Trump should avoid rash actions, if he is to become a transformational president, he will spurn an establishment desperately seeking to hold onto the world that is passing away.

Article V of the NATO treaty may require us to treat a Russian move in the Baltic as an attack on the United States. But no sane president will start a war with a nuclear-armed Russia over Estonia.

No Cold War president would have dreamed of so rash an action.

Rather than risk such a war, Ike refused to send a rifle or bullet to the heroic Hungarian rebels in 1956. Painful, but Ike put America first, just as Trump pledged to do.

And given the strength of ethnonationalism in Europe, neither the eurozone nor the EU is likely to survive the decade. We should prepare for that day, not pretend that what is taking place across Europe, and indeed worldwide, is some passing fever of nationalism.

Notwithstanding Secretary of State-designate Rex Tillerson’s diktat, the United States is not going to force China to vacate the fortified reefs in a South China Sea she claims as her national territory.

Stick to that demand, and we best prepare for war.

As for the Taiwan card, it was played in 1972 by Richard Nixon as the price of his opening to China. Four decades ago, Jimmy Carter cut diplomatic ties to Taiwan and terminated our security pact.

For Xi Jinping to accept that Taiwan might be negotiable would mean an end of him and the overthrow of his Communist Party of China.

The Chinese will fight to prevent a permanent loss of Taiwan.

The imperative of the new era is that the great nuclear powers — China, Russia, the United States — not do to each other what Britain, France and Germany did to each other a century ago over a dead archduke.

President Trump should build the wall, secure the border, impose tariffs, cut taxes, free up the American economy, bring the factories home, create millions of jobs and keep us out of any new wars.

With rare exceptions, wars tend to be fatal to presidencies.

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Violent Scenes From Washington D.C. As America’s Snowflakes Riot

Last night we noted that anti-Trump protesters had their first confrontation with police as American’s violent, disaffected youth threw eggs at guests and set fires outside of Trump International Hotel as people attempted to make their way to the new administration’s “Deploraball.”  But with the inauguration now over, protesters are showing no signs of slowing down as chaotic scenes of rioters destroying private property are flooding twitter.

 

Meanwhile, here is video of “DisruptJ20” protesters following through on the exact strategy to “blockade checkpoints” that Project Veritas exposed in a series of undercover videos posted just a couple of days ago.

 

And here are some of the protest scenes from last night.

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US Financial Markets – Alarm Bells Are Ringing

Submitted by Pater Tenebrarum via Acting-Man.com,

A Shift in Expectations

When discussing the outlook for so-called “risk assets”, i.e., mainly stocks and corporate bonds (particularly low-grade bonds) and their counterparts on the “safe haven” end of the spectrum (such as gold and government bonds with strong ratings), one has to consider different time frames and the indicators applicable to these time frames. Since Donald Trump’s election victory, there have been sizable moves in stocks, gold and treasury bonds, as the election result has strongly boosted certain market expectations.

 

 

The chart below compares three of the associated ETFs, namely SPY, TLT and GLD:

 

SPY, TLT and GLD – after the election, stocks rallied while treasuries and gold sold off. The main (but not only) driver of these moves were surging inflation expectations. Since mid December, treasuries and gold have quietly rallied though, in what seems to be widely considered a “technical bounce” one is usually advised to ignore (we won’t) – click to enlarge.

 

As we have mentioned late last year, US true money supply growth rates have accelerated sharply again. Since the stock market has concurrently broken out to new all time highs, its strength deserves some respect for now, despite the fact that valuations are extremely high. Our assessment is that there will likely be near term weakness, followed by medium term strength and ultimately a long term disaster. The “alarm bells” mentioned in the title of this post refer to the near term outlook.

In a recent article on post election seasonality (see “Regime Change – the Effect of Trump’s Victory on Stock Prices” for details) Dimitri Speck has pointed out that there is a case to be made for near term weakness based on the market’s average performance in post-election years. The question is now whether the current technical, sentiment and fundamental backdrop is conducive to market action that is in line with this statistical average.

Inflation expectations have trended higher through most of last year (note: we are referring to expectations regarding the future rate of change of CPI – they have nothing to do with monetary inflation). This is quite rational for a number of reasons. First of all, headline CPI is almost certain to rise due to last year’s rally in energy prices. This is due to a statistical artifact (the so-called base effect), the main characteristic of which is its inevitability.

 

5-year inflation  breakeven rates have been in an uptrend since early 2016, tracking the rally commodity prices. The trend has accelerated significantly since the US presidential election – click to enlarge.

 

Secondly, there is a strong and not exactly unreasonable suspicion that most of the economic policies favored by the Trump administration (at least some of which will presumably be backed by the Republican-controlled legislature) are  likely to push price inflation up. Higher government spending, tariff hikes, the possible deportation of cheap illegal workers, etc., are all deemed to lead to higher consumer prices.

Keep in mind in this context that the inter-temporal price distortions along the production structure triggered by the Fed’s loose monetary policy in recent years are fated to eventually shift and reverse anyway. Resources have been misallocated as too much has been invested in the higher stages of the economy’s capital structure relative to the lower stages. Eventually a bottleneck should emerge in terms of the demand for and supply of final goods, in conjunction with hitherto suppressed natural interest rates reasserting their influence on market rates.

The problem is that the real savings needed to support and maintain a lengthened production structure never existed – they were an illusion created by the printing press. The same holds for the decline in consumer demand implied by an increase in savings – it simply hasn’t happened (at least not to the extent indicated by market interest rates). The real funding for long term investment projects still needs to come from somewhere though.

It such investments are not supported by an increase in real savings, capital will be consumed. The falsification of economic calculation engendered by prices that have been distorted by credit expansion inter alia leads to the reporting of illusory accounting profits – later it turns out that capital maintenance has been lacking and the previously reported profits turn into very large losses (think about 2008/2009 as the most recent example of such an “unmasking”).  At some point the capital consumption will be reflected by a surge in market interest rates and a shift in prices. Many of Trump’s policy proposals (if implemented) are likely to hasten this process, ceteris paribus.

 

The ratio of capital goods to consumer goods production is a reflection of the policy-driven credit bubbles of recent decades. Currently the ratio is in a sideways channel at an extremely high level, as strong money supply growth and credit expansion have continued almost unabated since 2008. There is a natural limit to this trend though, provided the central bank does not opt for extreme inflation (we currently assume that it won’t, but this assessment may have to be changed in the future) – click to enlarge.

 

New Positioning Extremes

We can conclude from all this that the current positioning of speculators is at least partly justified, but their positions have become far too one-sided in the short term.  We have already shown a brief chart overview in mid December (see “The Exiling of Risk”), that illustrates the strong investor consensus that has emerged since the election and the enthusiasm with which short term traders have joined the bandwagon.

Recent developments in speculative positioning suggest that quite explosive counter-trend moves could be in store in the near term. We can once again report on new record highs in certain positioning data, which has almost become a tradition in this new era of unprecedented monetary policy extremism and the vast increase in systematic and fully automated trading. We never had occasion to use the terms “record high” and “record low” as often as in the past several years. This is an area in which some sort of “hyperinflation” is clearly underway.

This time it concerns speculative positioning in treasury futures. Below is a chart of the net hedger position (the inverse of the net speculative position) in 10-year treasury note futures. It actually serves as a proxy for the entire curve, as speculators have taken record net short positions across they entire maturity spectrum, with the exception of the 30 year bond. Even euro-dollar net speculative shorts are at a new record high of more than 2,444,000 contracts (equivalent to approx. 726,000 10 year treasury contracts). Mish has a report on the details here.

 

A new record high in the net hedger long position in 10 year treasury note futures and hence also in its inverse, the net speculative short position – click to enlarge.

 

Net speculator positions in treasury futures overall are currently equivalent to $100 billion in terms of cash treasuries. What makes this unprecedented case of speculators eagerly piling into the same trade especially interesting is the speed with which it happened and that they have decided to ignore the fact that the trade has actually stopped working a month ago.

Nearly every short position opened since mid December is under water by now, and yet, speculators keep enlarging these positions. But aren’t they correct in doing so? After all, it is a near-certainty that higher headline inflation rates will be reported in coming months. Moreover, even if the Trump administration only manages to implement a few of its policy proposals, upward pressure on price inflation will still result.

We believe the main problem with this is that it is simply too obvious. What everybody knows already is usually not really worth knowing. Once we see such extremes in positioning data, we should actually ask “what could go wrong with the obvious scenario”.

There are plenty of things that could go wrong – the possibilities include another crisis in the euro area (several critical elections are coming up),  problems in China’s currency and credit markets, a budding trade war, a surge in geopolitical upheaval, and so forth. Why all these so-called tail risks are so studiously ignored  all of a sudden is a bit of a mystery.

 

Real Interest Rates and Gold

A similar picture has emerged in the gold market: while speculators remain net long gold futures, their position has barely moved up from the one year low that was recently reached, despite the rally in gold prices. There are also other signs that sentiment on gold remains very cautious – so far the rebound seems to be met with plenty of disbelief, similar to what we can see in treasuries.

Readers may recall that near the recent correction lows in gold and gold stocks, some sentiment measures indiacted that bearish sentiment had reached rarely seen extremes (see our missive from late December: “Gold Ready to Spring Another Surprise” for details on this).

We will provide a more a more detailed update on the situation in the gold market in a separate post, but we want to show an update of one of the charts we discussed in the “fundamental drivers” section of the post mentioned above. As we have pointed out, the gold price at times leads changes in the trends of its fundamental macro-economic drivers.

The gold market is for instance highly sensitive to future changes in market liquidity and the reaction of central banks to such developments. At times this involves very long lead times. In the short term, the gold price appears the be sensing incipient trend changes in real yields. Gold has a very tight inverse correlation with 5 and 10 year TIPs yields, but often it is actually leading them slightly (sometimes by just a few days). This has just happened again as the updated chart of 5 year TIPs yields illustrates:

 

The short term trend in 5 year TIPs yields seems to have reversed again. They are no longer in positive territory, but have fallen back to zero – click to enlarge.

 

Stock Market Internals and Risk Appetite

The stock market itself actually still looks quite solid from a technical perspective – but not from a sentiment perspective. Confidence in a continued surge in stock prices has become way too pronounced, as sentimentrader’s “smart/ dumb money confidence spread” shows.

 

The smart/dumb money confidence spread has reached an extreme level again – which is actually diverging slightly from the one set in the summer months. Experience shows that such divergences often precede sizable corrections (if one studies the chart a bit, one can see several such instances actually – usually a higher low in the spread is put in place concurrently with a new high in stock prices or with stock prices retesting their previous highs). This spread is solely based on market data –  it includes no surveys – click to enlarge.

 

While there are small divergences evident in a few market internals as well, they are not yet pronounced enough to give cause for concern – but that could change very quickly. The last two sizable corrections were preceded by warning signs in several internals, but they were not particularly pronounced and one had to pay close attention to notice them in good time.

 

Market internals: a few small divergences with price are in evidence, but nothing major as of yet. The cumulative NYSE a/d line is still confirming the market’s strength, but one should keep a close eye on the “support shelf” consisting of the zero level in the NH/NL percentage spread – click to enlarge.

 

Someone once remarked to us that no bear market had ever begun while the cumulative NYSE a/d line still confirmed new price highs. That is actually not correct – while the a/d line and other internals usually do tend to diverge at major price peaks preceding bear markets, it does not always happen. A noteworthy exception occurred at the late 1937 market peak, which was confirmed by the a/d line, but was nevertheless followed by one of the fastest and steepest bear markets of the past century.

Below are two of the longer term indicators we follow. They usually have no bearing on the timing of short term market moves, but there have been a few recent developments worth mentioning. We already discussed the “Risk Appetite Index” in our mid December update. It remains at an extremely high level.

 

The sentimentrader “Risk Appetite Index”, a combination of the Citigroup Macro Risk Index, the Westpac Risk Aversion Index and the UBS G10 Carry Risk Index. Similar to the confidence spread shown further above, this index is solely based on market data and involves no surveys or other verbal or written expressions of opinions – click to enlarge.

 

What makes this so interesting is that after the person that was widely held to generate major “uncertainty” in the markets has become president of the US, market prices and positioning seem to indicate that certainty is greater than ever!

Zerohedge recently reported that the Goldman Sachs version of the risk appetite index has actually reached a new record high. The previous all time highs in this particular index were posted at the market peaks in 2000 and 2007, which are somewhat ominous precedents.

The mutual fund cash-to-asset ratio has finally also reached a new all time low of 3.1% at the end of 2016 (here we go again with the records!). It previously touched the former record low of 3.2% several times and has in the meantime ticked back up to that level. The persistently low level of this ratio in recent years represents the longest stretch of record or near record low readings in the history of the data (which begins in 1955).

 

Mutual fund cash-to-assets ratio: a new record low of 3.1% was recorded in December of 2016 – click to enlarge.

 

As mentioned above, this indicator is not useful for forecasting the timing of near term corrections. Similar to extremely high valuations, all it is telling us is that the market’s long term returns are likely to be very poor.

Lastly, the VIX –  a measure of the implied volatility of S&P 500 index options – also shows that complacency is quite pronounced at the moment. This is likely to be relevant for the market’s near term outlook, especially in view of the fact that speculators currently hold near record net short positions in VIX futures as well (129,000 contracts net as of the most recent CoT report– the record high posted in September 2016 was 138,000 contracts).

 

The VIX shows that investors are quite complacent – and it is accompanied by an extremely large net speculative short position in VIX futures as well, yet another vehicle that has broken a number of records in the past few years. Extremely low implied volatility as a rule tends to be followed by very high realized volatility – click to enlarge.

 

Conclusion

The recent extreme in net speculative short positions in treasury futures is a warning sign for risk assets – while it is per se not a bullish indicator for bonds, it makes treasury notes and bonds very vulnerable to a sizable upside correction. This is also confirmed by a decline in the five day average of the DSI (daily sentiment index of futures traders), which stood at only 9.8% bulls in early January.

Traders have so far largely ignored the quiet advance in treasuries and gold since mid December, which makes these rallies all the more intriguing. At the same time we see risk appetite indicators at or near record highs, while confidence regarding the trend in stock prices among the groups of traders most likely to be wrong is extremely high. Incidentally, the combined dollar-weighted net speculative long position in stock index futures is right at the upper end of its multi-year range as well.

While stock market internals are more or less still neutral at this stage, such extremely one-sided speculator positioning (recall also recent NAAIM survey data) should not be ignored. If any unexpected fundamental news should emerge that throw doubt on the beliefs so widely held by market participants of late, a sizable surge in market volatility is likely to ensue.

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Oil Slides After Rig Count Spikes Most Since April 2013

While a desperate Saudi Arabia jawbones how well OPEC production cuts are going, the road ahead looks like a surge in US Shale supply is coming. Following a brief dip in the previous week, US oil rig counts soared 29 to 551 last week – the biggest weekly rise sicne April 2013 – to the highest since Nov 2015.

*U.S. OIL RIG COUNT UP 29 TO 551 , BAKER HUGHES SAYS :BHI US

 

Which signals to OPEC that more production is coming…

 

And WTI prcied are leaking lower…

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President Trump’s Inaugural Address Was The Shortest Since Carter

Trump’s 16 minute, 12 second, 1455 word inaugural address is the shortest since President Carter in 1977 (and second shortest to Kennedy since the end of World War II). The brevity, however, did not hide the tone…

Carter and Kennedy were the closest in terms of brevity…

Source: The American Presidency Project

Butthe following word cloud makes it very clear what the focus of his speech was…

h/t @BBCBarbaraPlett

America, First!

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Trump’s Economic Plan: Create 25 Million Jobs, Grow GDP At 4%, Lower Taxes For All Americans

President Trump’s economic plan will create 25 million new jobs in next decade, “return to 4 percent annual economic growth,” “lower rates for Americans in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate” according to a statement just posted on the White House wesbite.

He has also proposed “a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations.”

The statement also announced the US withdrawal from the Trans-Pacific Partnership and that he is committed to renegotiating NAFTA. “If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA.”

From the White House website

Bringing Back Jobs And Growth

 

Since the recession of 2008, American workers and businesses have suffered through the slowest economic recovery since World War II. The U.S. lost nearly 300,000 manufacturing jobs during this period, while the share of Americans in the work force plummeted to lows not seen since the 1970s, the national debt doubled, and middle class got smaller. To get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth.

 

The plan starts with pro-growth tax reform to help American workers and businesses keep more of their hard-earned dollars. The President’s plan will lower rates for Americans in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate, which is one of the highest in the world. Fixing a tax code that is outdated, overly complex, and too onerous will unleash America’s economy, creating millions of new jobs and boosting economic growth.

 

As a lifelong job-creator and businessman, the President also knows how important it is to get Washington out of the way of America’s small businesses, entrepreneurs, and workers. In 2015 alone, federal regulations cost the American economy more than $2 trillion. That is why the President has proposed a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations that should be repealed.

 

With decades of deal-making experience, the President also understands how critical it is to negotiate the best possible trade deals for the United States. By renegotiating existing trade deals, and taking a tough stance on future ones, we will ensure that trade agreements bring good-paying jobs to our shores and support American manufacturing, the backbone of our economy. The President plans to show America’s trading partners that we mean business by ensuring consequences for countries that engage in illegal or unfair trade practices that hurt American workers.

 

By standing side-by-side with America’s workers and businesses, the President’s policies will unleash economic growth, create 25 million new jobs, and help Make America Great Again.

The White House also posted the following statement on trade.

Trade Deals Working For All Americans

 

For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country. As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.

 

With a lifetime of negotiating experience, the President understands how critical it is to put American workers and businesses first when it comes to trade. With tough and fair agreements, international trade can be used to grow our economy, return millions of jobs to America’s shores, and revitalize our nation’s suffering communities.

 

This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers. President Trump is committed to renegotiating NAFTA. If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA.

 

In addition to rejecting and reworking failed trade deals, the United States will crack down on those nations that violate trade agreements and harm American workers in the process. The President will direct the Commerce Secretary to identify all trade violations and to use every tool at the federal government’s disposal to end these abuses.

 

To carry out his strategy, the President is appointing the toughest and smartest to his trade team, ensuring that Americans have the best negotiators possible. For too long, trade deals have been negotiated by, and for, members of the Washington establishment. President Trump will ensure that on his watch, trade policies will be implemented by and for the people, and will put America first.

 

By fighting for fair but tough trade deals, we can bring jobs back to America’s shores, increase wages, and support U.S. manufacturing.

Additionally, the White House website was updated with section on “Making the Military Strong Again“, on Foreign Policy, on Law Enforcement and on Energy, most of which seem to be repeats of his plan posted previously on the Trump transition website.

Of final note, the White House section on Climate Change appears to now be gone.

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