Tag: finance

Authored by Jeffrey Tucker via The American Institute for Economic Research,

“It’s a movie about one man’s descent into madness,” he said.

“Nothing else.” 

So warned the ticket seller at the theater after I told him which movie I was going to see: The Joker. Why is the ticket seller pre-reviewing this movie for me? The line seemed overly rehearsed, a cautionary note to viewers as a way to prevent what has concerned people, namely that the movie’s fictional mayhem would generate real-world copycats. 

Still, his mini-review did give me some reassurance. I had to drag myself to see the film that everyone is talking about. The previews alone were too creepy. Life is tough enough without movies introducing more sadness, which is precisely why I like to stick with uplifting fare. Still, I marshaled my way through this one. 

There is a superficial way in which the man is correct. This is just about one guy. Even after leaving, I kept telling myself that. And yet after it was over, I experienced precisely what so many others have reported. The movie imparts an aura that you can’t shake. You take it home with you. You sleep with it. You wake up in the morning and see that damned face again. You think through scenes. Then you remember things. Then more starts to make sense – not moral sense but narrative sense. 

It was also tremendously unpleasant viewing, the most difficult two-plus hours of movie watching I can remember. It’s also brilliant and gripping in every frame. The score is perfect. And the acting didn’t seem like acting. 

As for the “just one man” interpretation, that’s hard to sustain. The street scenes. The subways packed with people wearing clown masks, headed to the protest. The rich, established businessman running for mayor and the protests that engender. The strange way in which this unsettling and violent figure becomes a folk hero on the streets. There is surely a larger point here. 

Yes, I’ve seen the usual tug-of-war on Twitter about what it means.

• It’s pro-Antifa!

• It’s a conservative warning against extremist politics!

• It’s a right-wing smear against the leftward drift of the Democrats!

• It’s a left-wing apologia for the rise of the workers against the elites, so of course eggs need to be broken! 

The trouble is that none of those narratives explain the various twists and turns, and the unease and ambiguity that the film creates within the viewer. 

It took me a full day to come up with an alternative theory. The thesis probably pertains to all renderings of The Joker in print or film but this one is particularly prescient because its sole focus is on the one character, with the most elaborate backstory yet given. The trouble begins with personal life failures. While this man is troubled, you sometimes think that perhaps he is not so far gone as to be irredeemable. He might function well. He can get through this, just like everyone else deals with their own demons. Joaquin Phoenix does a great job of slipping in and out of crazy. He seems to behave fine around his mother, and his brief girlfriend. He has interactions that are not totally wrecked by his eccentricity.

Yet there are life circumstances that keep driving him more and more to the point that he loses love for life as it is. He gives up hope and fully embraces despair as a way of thinking and living. And then he does evil and discovers something that empowers him: his conscience does not provide a corrective. On the contrary, the evil he does makes him feel empowered and valued. 

To review: his life was not working; he found something that worked for him finally. Then he embraced it. 

What is that thing he embraced?

It has a particular name in the history of ideas: Destructionism. It’s not just a penchant; it’s an ideology, an ideology that purports to give shape to history and meaning to life. That ideology says that the sole purpose of action in one’s life should be to tear down what others have created, including life itself. This ideology becomes necessary because doing good seems practically impossible, because one still needs to make some difference in the world to feel that your life has some direction, and because doing evil is easy. The ideology of destructionism enables a person to rationalize that evil is at least somehow preparing the ground for some better state of society in the future. 

What is that better state? It could be anything. Maybe it’s a world in which everyone owns everything equally. Maybe it is a world without happiness or a world with universal happiness. Maybe it is a world without faith. Maybe it is national production with no international trade. It’s a dictatorship  – society conforming to One Will. It’s the absence of patriarchy, a world without fossil fuels, an economy without private property and technology, production without the division of labor. A society of perfect morality. The ascendance of one religion. Whatever it is, it is illiberal and therefore unworkable and unachievable, so the advocate must eventually find solace not in creating but in destroying the existing order. 

The first time I read of the concept was in Ludwig von Mises’s 1922 book Socialism. He brings it up toward the end after having proven that socialism itself is impossible. If there is nothing positive to do, no real plan to achieve anything socially beneficial; because the whole idea is cockamamie to begin with, the proponents must either abandon the theory or find satisfaction in the demolition of society as it currently exists. Mises says that the attitude is very obvious in communism. But, he says, it is just as present in social democratic versions because their plans to achieve the utopian ideal in stages are equally untenable in practice. 

Destructionism becomes a psychology of wreckage imparted by an ideology that is a failure by necessity of theory and practice. The Joker failed at life and so sets out to destroy it for others. So too are those consumed by an ideological vision to which the world stubbornly refuses to conform. 

This is why any left/right interpretation of The Joker is too limited. In our own times, we are gorged by media and politics with insane visions of how society should work. It should not surprise us when these visionaries ultimately turn to anger, then dehumanization of opponents, and then plot plans for tearing down what exists just for the heck of it. That “what is” could be world trade, energy consumption, diversity, human choice generally, the existence of the rich, a degenerate race, the frustration of one man with his absence of effective power. 

Destructionism is stage two of any unachievable vision of what society should be like against a reality that refuses to conform. Destructionism also proves to be strangely compelling to populist movements that are anxious to externalize their enemies and smite the forces that stand in the way of their reassertion of power. Finally they discover satisfaction in destruction – as an end in itself – because it makes them feel alive and gives their life meaning. 

The Joker, then, is not just one man, not just a crazy person, but the instantiation of the insane and morbid dangers associated with persistent personal failure backed by a conviction that when there is a fundamental conflict between a vision and reality, it can only be solved by the creation of chaos and suffering. As unpleasant as it is, The Joker is the movie we need to see to understand and then prepare for the horrors that this unchecked mentality can unleash on the world. 

In other words, The Joker has already created copycats, and has been doing so for centuries. The movie is the copycat. 

Back in the summer and fall of 2016, one of the recurring bogeyman the liberal media used to try and scare the public into voting for Hillary Clinton – in addition to poll after rigged poll showing Clinton is a 100% guaranteed winner, meant to suppress voter turnout – was that the stock market would instantly crash and never recover.  How can one ever forget the blatant idiocy such as the following pablum from Nobel-prize winning economist Paul Krugman who hours after the Trump victory wrote  “It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?… we are very probably looking at a global recession, with no end in sight.”

Coming from the person who once said the internet would have the same impact on the world as a fax machine, one wouldn’t expect more from the NYT op-ed writer, but his opinion did accurately represent what the mainstream was “thinking” at the time.

Which brings us to today and the growing odds that Elizabeth Warren will not only be the Democratic candidate, but may also be the next US president… and yes, Hillary Clinton has somehow managed to sneak into 3rd place after Joe Biden.

It will hardly come as a surprise to anyone, that unlike Joe Biden…

…. Elizabeth Warren is widely seen as the most market unfriendly potential democratic president.

Warren’s recent surge in the polls is also why last week Bank of America cautioned that “investors can’t ignore election risk any longer.”

Commenting on the possible consequences of a Warren victory, BofA said that the most straightforward is higher volatility, although the uniqueness of this scenario “also implies there is not a readily available trading playbook investors can rely upon.” The bank also cautioned that financials and health care companies will likely be the biggest “president Warren” casualties, as these two sectors stand to lose the most if Warren were to be elected, at least based on her track record and rhetoric.

In particular, Financials are likely to weaken on the risk of an increase in regulation (“The real cause of the crash was not some inevitable cycle; this crash was the direct consequence of years of deliberate deregulation…”, Apr 2014 – Elizabeth Warren). Arguably, Financials would also be hurt by falling yields if markets were spooked and a textbook flight-to-safety type of sell-off played out. The Health Care sector is also at risk given Warren’s push for Medicare-for-All (“I spent a big chunk of my life studying why families go broke. One of the number-one reasons is the cost of health care, medical bills. [..] Medicare for all solves that problem”, Jun 2019 – Elizabeth Warren).

As a reminder, Warren has pitched ideas like “accountable capitalism,” and advocated for consumers and employees over shareholders and investors. Her recent surge in key state and national polls has stoked concern about sectors such as biotechnology, for-profit schools, health insurance, and even the U.S. dollar. Some market players have voiced unease.

To be sure, we have covered all of this previously, and over the weekend JPM also issued a “Warren warning” writing that  “Investor concerns about Elizabeth Warren’s tax and regulatory policies especially regarding banks, big tech, energy and healthcare are well known. So sustained increases in the likelihood of her running for the Presidency after winning the nomination could unnerve markets.”

But just like in the case of the Trump warnings in 2016, is it possible that Warren’s ascendancy to the presidency won’t be such a shocking event for the market as it has been portrayed?

That is the argument made by RBC’s head of US equity strategy, Lori Calvasina, who today published “four thoughts” on the implications for the US equity market if Warren wins the White House in 2020, in which she writes that “any pain from a Warren win is likely to be temporary,” noting that “most of the sectors at high risk under a Warren presidency from a policy perspective (Financials, Energy, Health Care, Industrials) are already deeply undervalued versus the broader market” (both Morgan Stanley and Bank of America would wildly disagree with this).

Not only does Calvasina think that the downside is limited, she also believes that there is much more upside for what else, the market’s latest virtue signalling darling, ESG investments, noting that the election of a progressive Democrat could be “supportive of the already growing popularity of ESG as an investment approach.”

The RBC strategist also predicted that small caps might outperform larger stocks, as they may have less direct risk from policy changes in a time when anti-trust threats are swirling around the tech giants; Indeed, any breakups of big technology companies “would be a problem” for a few stocks with “mega” market capitalizations, though it could be a positive for retailers and others that have suffered from the rise of Amazon.com, she wrote. And regional banks might be hurt less than the bigger financials.

In summary RBC is confident that just like with the Trump election, the market response would be far more muted than consensus expects: “the stock market tends to go up over time, regardless of who occupies the White House. This is true even when Democrats control the White House and both chambers of Congress.”

Calvasina ends on an optimistic note: “ultimately we think Corporate America and U.S. equity investors would learn to adapt to new political leadership, as they always do.”

Below we represent RBC’s “four thoughts” on what the implications for the stock market will be if Warren wins in 2020:

• 1. This risk could play out in the equity market well before Election Day. Though impeachment is pulling some of the impact into 4Q19, we have expected fears of a Warren win to be a headwind for the stock market in the first half of 2020 (particularly 1Q20), and that continues to be our view today. The timeline of events is key. The Iowa caucus takes place on February 3rd. Across all states, forty percent of the Democratic delegates will be assigned by early March, and roughly 2/3’s will be assigned by the end of March. If Warren wins the nomination, we expect most of the pain associated with a White House victory to occur well ahead of Election Day.

• 2. The combination of a Warren White House and Democratic Congress would be extremely challenging for stocks from a bottom-up perspective. So far, Warren has distinguished herself in the primary through policy. The sheer multitude of her plans leaves US equity investors with few safe havens. Interestingly, the participants in our September investor survey highlighted Health Care as the primary sector at risk if Democrats sweep the White House and Congress in 2020.

But our own analysis, which relies heavily on a survey that we conducted of RBC industry analysts in early October plus our review of which sectors have been benefiting the most from lower corporate taxes and share buybacks, tells us that  the combination of a Warren White House and Democratic Congress is also an extremely high risk for Energy and Financials. There is also a significant degree of risk for Industrials and Tech (though a bit lower than the three previously mentioned sectors). The implications for Consumer Discretionary, Communication Services, Materials, and Consumer Staples are mixed, while risks are lowest for Utilities and REITs. See page 15 for our 2020 election sector heat map, in which we outline which Warren policy positions seem likely to affect each of the major GICS sectors, as well as our overall take on the implications of the election for each sector.

 

• 3. Despite the myriad challenges at the sector level, we envision a number of investable themes that US equity investors would be able to focus on under this scenario. First, the election of a progressive Democrat seems supportive of the already growing popularity of ESG as an investment approach, since issues like climate change and fair pay could be in the spotlight. Second, dividends seem likely to become a more popular use of cash, since buybacks would be out of favor politically. This benefits the two sectors that we believe have the least direct policy risk (Utilities and REITs) but could also offset some of the pain in Financials and Energy, other major dividend payers which are already deeply undervalued relative to the broader US equity market. Other sectors also seem likely to shift their attention from buybacks to dividends, and we note that dividends were already in greater focus among S&P 500 companies in 2Q19 reporting season. Third, our initial assessment is that Small Caps may have less direct policy risk than Large Caps. Big Tech break ups would be a problem for a select few Mega Cap Internet names (affecting Large Cap Consumer Discretionary and Communication Services) but could be a positive for other Internet names along with Retailers that have suffered from the dominance of AMZN (many of which are Small Caps). Our SMID cap Banks analyst also sees a Warren presidency as a bit less of a negative for regional names than their big cap counterparts.
   
• 4. Any pain from a Warren win is likely to be temporary. While the broader US equity market looks expensive, particularly on non-P/E metrics which have not been pushed down by tax reform, most of the sectors at high risk under a  Warren Presidency from a policy perspective (Financials, Energy, Health Care, Industrials) are already deeply undervalued vs. the broader market. More importantly, the stock market tends to go up over time, regardless of who occupies the White House. This is true even when Democrats control the White House and both chambers of Congress. Interestingly, the best historical returns in the S&P 500 have occurred with a Democrat in the White House, when Republicans control at least one chamber of Congress. In the short-term, stocks don’t respond well to heightened economic policy uncertainty.

Ultimately we think Corporate America and US equity investors would learn to adapt to new political leadership, as they always do.

Authored by Dominick Paolini and Patrick Hennessy via IPS Strategic Capital,

I learned a long time ago as a young broker on Wall Street that when looking at a potential trade, if the numbers look good, buy the position. Conversely if the numbers look bad, take the other side of the trade.

The popularity of exchange traded options has exploded in recent years in the investment community.  Billions of dollars have been allocated into options-based strategies and mutual funds from both institutional and retail investors alike.

Cboe Global Markets (Cboe) has been a major influence in the increase of volume by publishing their suite of Strategy Benchmark Indexes. Some of the more popular strategy indexes are the Cboe S&P 500 BuyWrite Index® (BXM), Cboe S&P 500 PutWrite Index (PUT), and the Cboe S&P 500 Iron Condor Index (CNDR).  These indices are based on the premise that selling options takes advantage of a well known risk premium called the volatility risk premium (VRP).

The premise is based on the insurance axiom that an option is an insurance policy on the market. The seller of insurance (options) should be paid an excess premium for the obligation of paying out on a contract. This is no different than an insurance company that is obligated to pay out on your wrecked car or your damaged home.  The thought is that one can capture this risk premium by selling options when implementing equity exposure to give them better risk-adjusted returns than owning the underlying equities. However, we must not forget that selling financial insurance is not the same as selling hurricane insurance. Selling a hurricane insurance policy has no effect on the magnitude of future hurricanes, selling financial insurance can and does effect future market outcomes.

The following chart shows how the three most popular options premium-selling indices (PUT, BXM and CNDR) ex-post performance from 1990 to 2009. Note how these indices would have nicely outperformed the S&P 500.

Performance of S&P 500, PUT, BXM, and CNDR from inception (1/2/1990) to 12/31/2008. Source: Bloomberg

After looking at the chart, it’s not surprising that the “Warren Buffetts” of the world love selling insurance (GEICO Insurance).

What if Everybody Becomes an Insurance Seller?

Volatility Risk Premium estimation. Source: Macro Risk Advisors

As indicated in the chart above, as more and more investors pile into option selling strategies, two things happen.  First, it increases the supply as opposed to demand of options, since there are more sellers than buyers in the market, option prices become suppressed. As a result, the excess premium between the cost and value (implied volatility – realized volatility) for selling options are suppressed.  So, the question is, when is selling premium not worth the risk?

The following chart courtesy of QVR Advisors shows how the net buying/selling of options was, in vega/gamma terms, positive in the post GFC period and has continually dropped reaching almost -$400 million vega/-$100 million gamma per month in 2018.  What this tells us is that the net selling of option premium has far exceeded option buying (long options creates positive vega/gamma, selling an option creates negative vega/gamma). This is most likely due to the popularity of option selling strategies in both retail and institutional communities starting in 2013.

Estimate of net S&P 500 options gamma/vega flows. Source: QVR Advisors

This phenomenon can be observed by evaluating option selling strategies since 2009 as the following chart shows. The outperformance from 1990-2009 that most likely drove massive amounts of AUM to these strategies helps to understand why they have struggled since.

Performance of S&P 500, PUT, BXM, and CNDR from 12/31/2008 to 8/28/2019. Source: Bloomberg

The chart shows that selling premium hasn’t been nearly as attractive since 2009. As we dig a little deeper and look at these short volatility indices since 2018, the performance continues to look worse.

Performance of S&P 500, PUT, BXM, and CNDR from 12/29/2017 to 8/27/2019. Source: Bloomberg

In-light-of this massive influx of option selling strategies and compressing VRP, money managers have leveraged-up option selling to keep up with their benchmarks. Once you start leveraging up, you start adding a lot of negative gamma and vega risk. This means if the markets should move drastically in one direction or the other (depending on where you are short options), strategies that were sold to the public as a safe alternative income strategies become a nightmare.  One example of this is what happened to the popular mutual fund Catalyst (HFXIX) which leverage-up short calls.  When the market exploded up after the Trump election, the fund fell off a cliff.

HFXIX vs S&P 500. Source: Bloomberg

The Catalyst Hedged Futures Fund (HFXIX) in yellow lost over 30% between December 2016 and March 2017.  This is a common theme of many short volatility option strategies. Most of the option strategies listed in the Morningstar database are short volatility strategies (selling options to drive return).

An extreme example of how this leverage can kill is the LJM Preservation & Growth Fund. The fund’s strategy involved selling strangles on the S&P 500. As the S&P 500 marched higher in 2017, they were forced to continue leveraging up these positions to keep up with the market. After the blow off top in January 2018, holding extremely leveraged short strangle positions, the fund lost over 85% on February 5th, 2018 when XIV imploded.  A fund with a 20+ year track record that navigated through volatility in 2000 and 2008 was taken out in a single day.

LJMIX vs. S&P 500. Source: Bloomberg

I am reminded of the famous quote in a book by Roger Lowenstein ‘When Genius Failed’ which is about how Long-Term Capital Management failed.  He quoted an outside money manager as saying, “selling premium is like picking up nickels in front of a steam roller”. Those investors that were in some of these short option strategies that have blown-up understand this all too well.

Is it Time to Look at the Other Side of the Trade?

Since 2018, the spread between implied volatility and subsequent realized volatility has been negative over 42% of the time with observable long-tail risk (in red). In the past this has averaged closer to 30% suggesting that something is amiss.

MRAIVRP Index from 12/31/2017 – Aug 2019. Source: Bloomberg & MRA

As money pours into options selling strategies, suppressing the VRP, money managers are forced to leverage-up to keep up. Professional money managers and traders must ask the question, is the risk /return profile favorable and is it time to look at the other side of the trade?

One way we can quantify this question is to look at the other side of the trade, compare being long options instead of being short options. To drive this point home, let’s look at a strategy that has similar price exposure (e.g. 50 Deltas like the PUT and BXM indices) but takes the other side of selling options, buying options.

The chart below is a backtest of the following strategies since 12/31/2017:

• Red line – buying 30d ATM SPX calls, rolled with 10 DTE

• Blue line – selling 30d ATM SPX puts, rolled with 10 DTE

• Gold line – SPX covered call strategy, rolled with 10 DTE

• Green line – benchmark (a delta equivalent amount of the underlying, SPX)

*Note that all strategies have 50 Delta when the positions are initiated but the put write and covered call use short options to implement exposure while the long call purchases the options to implement the exposure.

Source: IPS Strategic Capital, ORATS Backtesting Data, Python, Bloomberg

Clearly, this chart shows that the edge has flipped to buying options (red line).  Will this phenomenon persist or is this just an anomaly? Nobody knows; however, the truth is selling premium is alive and well and money continues to pour into these strategies, which means being long options have become relatively cheap.  If you can own optionality receiving the benefit of being long gamma with a low carry cost, then you can participate in the markets upside but define your risk to the downside. Using optionality in this way, we have learned that it is possible to achieve the proverbial “have your cake and eat it too”. There are very few long option strategies in the marketplace today that are effectively exploiting this edge and are worth exploring.

Former San Francisco mayor and California lawmaker Willie Brown has given the cold shoulder to his former side-piece Kamala Harris, whose career Brown says he boosted while the two were dating decades ago. 

“Yes, we dated. It was more than 20 years ago. Yes, I may have influenced her career by appointing her to two state commissions when I was Assembly speaker,” Brown wrote in January, adding “And I certainly helped with her first race for district attorney in San Francisco.” 

That said, just because Kamala and Brown went to pound town doesn’t mean she’s earned his endorsement – as the 85-year-old retired politician says that Hillary Clinton should “come out of retirement, lace up the gloves and get back in the ring with President Trump for what would be the biggest political rematch ever.” 

“Call me crazy, but from what I’ve seen so far, Clinton is the only candidate short of Barack Obama who has the brains, the battle-tested brawn and the national presence to take out Trump. And Obama can’t run,” wrote Brown in the San Francisco Chronicle. 

Brown notes that Bernie Sanders “was fading even before his heart started acting up,” and former Vice President Joe Biden “has become Trump’s main talking point in the whole Ukraine-China impeachment mess, which hardly helps him,” adding “And he wasn’t exactly running away with it before that.”

“Think about it. Hillary is still the smartest of the bunch. She’s also better known than any of the candidates, so she doesn’t need a lot of money. “Most of all, she can take a punch. Heck, she can take a 2-by-4 over the head and stay standing.” -Willie Brown

According to PredictIt, Clinton is currently tied for fourth place with Bernie Sanders to win the Democratic presidential nomination. 

Meanwhile, the RealClearPolitics poll aggregator looks as though Warren is about to make Joe Biden irrelevant, while Bernie Sanders has fallen off a cliff amid his heart attack. 

Harris, meanwhile, hasn’t recovered since Tulsi Gabbard shattered her dreams on live television in less than three minutes. 

Tulsi takes down Kamala Harris over her record on criminal justice reform, the death penalty, and the war on drugs -TULSI2020 #DemDebate #Tulsi2020 https://t.co/7XQoiqHThu pic.twitter.com/epf58iQNYI

— Tulsi Gabbard (@TulsiGabbard) August 1, 2019

Via SchiffGold.com,

Last week, we got bad news in the manufacturing sector. The ISM index of national factory activity dropped to a 10-year low. It was the second straight month the number was below 50, which indicates a contraction in manufacturing. That news sent stock markets into a tailspin. This was followed up by a very week service sector report the following day.

In his most recent podcast, Peter Schiff said the service sector is about to follow manufacturing into recession. He also talked about the recent employment numbers and explained how the Fed is acting like a Soviet Politburo.

The ISM nonmanufacturing index came in at 52.6% for September, down from August’s reading of 56.4%. The data was much weaker than expected. The consensus forecasts projected a reading of 55.5%. It was the lowest reading in three years. The mainstream pundits warned that the disappointing service sector data could boost recession fears as this is the largest component of the US economy.

On that news, the Dow shed another 300 points.

But then stocks rallied later in the day. Why? Because the probability of an October interest rate cut shot up to 90%.

So, what basically saved the market was the increased probability that the Fed was going to come to the rescue of the market by cutting rates.”

Keep in mind – the manufacturing economy is already in a recession. Retailing is also in a recession.  In fact, US shopping mall vacancies have hit an 8-year high. According to data from Moody’s Analytics’ Reis, 9.4% of units were unoccupied in Q3. That equals a post-financial crisis high reached in 2011.

The service sector is the only part of the economy that is not in recession, so the evidence that now the service sector is starting to buckle made people worry but also made people relieved because now the prospects of a Fed rescue are more likely.”

But Peter doesn’t think the Fed has enough up its sleeves to actually make a difference.

I think that there already is enough expectations for rate cuts that the probability going up is not enough to really put in a floor on the market.”

When the stock market tanked during the fourth quarter of 2018, the central bank was able to reverse the decline because of a substantial reverse in policy with the “Powell Pause.” At the time, the Fed was pushing rates up and the central bank was engaging in quantitative tightening.

When the markets responded to those threats by collapsing, the Fed was able to do a complete policy 180, going from rate hikes to rate cuts, and in fact, going from quantitative tightening to effectively having quantitative easing. But if all that is already in play, if the markets start to tank again, I don’t really think there’s enough ammunition left in the Fed’s chamber there to have a meaningful impact on the markets, and I think traders are overestimating the ability of the Fed to rescue the market the way it has rescued it in the past.”

When Peter mentioned effective quantitative easing, he was referencing the Fed’s recent repo operations. On Friday, we got the latest information on the Fed’s balance sheet. Peter said the balance sheet expanded even more than he expected. It was up by $88.1 billion — in one single week. Over the last three weeks, since the Fed began repo operations, the balance sheet has expanded by $176 billion. Peter said at the rate we’re going, the balance sheet will be back over $4 trillion in just another couple of weeks.

If you go back to QE3, the Fed was buying $85 billion worth of debt instruments every month.

That was an official quantitative easing program. Today, there is no quantitative easing program. The Fed says they’re not doing any quantitative easing. Yet the balance sheet is now growing twice as fast – more than twice as fast – when they’re not doing quantitative easing than when they were. So obviously, that’s exactly what they’re doing.”

Peter pointed out that the nature of the program is different. The Fed is taking in more short-term debt instruments. But the principle is the same as QE.

The Federal Reserve is creating money out of thin air and then using the money that it creates out of thin air to buy up debt instruments for the sole purpose of preventing interest rates from rising.”

In a nutshell, the Fed is trying to manipulate the interest rate. The bureaucrats at the central bank are substituting their judgment for the market’s.

This is no different than a Politburo in the Soviet Union deciding what the price of bread is going to be.”

Peter also dug into the most recent jobs report in this podcast. As usual, it’s not what the mainstream is making it out to be.

Erdogan’s promised Turkish military operations in northeast Syria has begun, as confirmed by regional media and video footage. On Monday night Turkish fighter jets commenced bombing the Semelka Border Crossing in far northeast Syria on the border with Iraq. 

Both Hezbollah-affiliated al-Mayadeen television channel and Israeli media are also reporting Turkish jets have attacked Kurdish targets in northern Syria.

#BREAKING: Reports: Turkish warplanes have bombed the Semelka Border Crossing at the Syria-Iraq border
pic.twitter.com/4Pi1mAratB

— Amichai Stein (@AmichaiStein1) October 7, 2019

This as the US claimed to have effectively shut down Northern Syria airspace to Turkey, and while Russian jets have reportedly been observed patrolling southern Syria, presumably to ensure the Turkish incursion comes nowhere near Syrian Army positions.

Turkey’s Anadolu Agency also reports Turkish officers have been expelled from the Joint Air Operations Center which was the heart of coordinated anti-ISIL activities among the allies, meaning US surveillance and reconnaissance data are no longer shared with Ankara.

Citing Pentagon spokeswoman Carla Gleason, Anadolu noted, however: 

She stopped short of saying that the air space has been shut down to Turkey, but noted “if you’re not on the air tasking order, it’s really hard to coordinate flights in that area.”

We might note that when it comes to the Kurds, Erdogan has never suffered qualms about having to “coordinate” his actions with allies. 

It appears Trump’s dire Twitter warning to “obliterate” Ankara’s economy, directed both at the Turks and at US hawks who accuse the president throwing Kurdish partner forces to the wolves, was ineffective, given by all indicators a Turkish aerial campaign has commenced.

Meanwhile Turkey’s military spokesman has ominously warned that the army will move forward to “correct the demographics changed by YPG in Northeast Syria” and further that “Turkey won’t allow ISIS to return in any shape or form.” 

As Syria’s Kurds have warned from the beginning, and as the military spokesman’s words darkly imply, it appears Turkey’s campaign will be toward full-on ethnic cleansing of Kurds from the border regions. 

Authored by Matt Taibbi via RollingStone.com,

The ‘Whistleblower’ Probably Isn’t

It’s an insult to real whistleblowers to use the term with the Ukrainegate protagonist

Start with the initial headline, in the story the Washington Post “broke” on September 18th:

TRUMP’S COMMUNICATIONS WITH FOREIGN LEADER ARE PART OF WHISTLEBLOWER COMPLAINT THAT SPURRED STANDOFF BETWEEN SPY CHIEF AND CONGRESS, FORMER OFFICIALS SAY

The unnamed person at the center of this story sure didn’t sound like a whistleblower. Our intelligence community wouldn’t wipe its ass with a real whistleblower.

Americans who’ve blown the whistle over serious offenses by the federal government either spend the rest of their lives overseas, like Edward Snowden, end up in jail, like Chelsea Manning, get arrested and ruined financially, like former NSA official Thomas Drake, have their homes raided by FBI like disabled NSA vet William Binney, or get charged with espionage like ex-CIA exposer-of-torture John Kiriakou. It’s an insult to all of these people, and the suffering they’ve weathered, to frame the ballcarrier in the Beltway’s latest partisan power contest as a whistleblower.

Drake, who was the first to expose the NSA’s secret surveillance program, seems to have fared better than most. He ended up working in an Apple Store, where he ran into Eric Holder, who was shopping for an iPhone.

I’ve met a lot of whistleblowers, in both the public and private sector. Many end up broke, living in hotels, defamed, (often) divorced, and lucky if they have any kind of job. One I knew got turned down for a waitressing job because her previous employer wouldn’t vouch for her. She had little kids.

The common thread in whistleblower stories is loneliness. Typically the employer has direct control over their ability to pursue another job in their profession. Many end up reviled as traitors, thieves, and liars. They often discover after going public that their loved ones have a limited appetite for sharing the ignominy. In virtually all cases, they end up having to start over, both personally and professionally.

With that in mind, let’s look at what we know about the first “whistleblower” in Ukrainegate:

• He or she is a “CIA officer detailed to the White House”;

• The account is at best partially based upon the CIA officer’s own experience, made up substantially by information from “more than a half dozen U.S. officials” and the “private accounts” of “my colleagues”;

• “He or she” was instantly celebrated as a whistleblower by news networks and major newspapers.

That last detail caught the eye of Kiriakou, a former CIA Counterterrorism official who blew the whistle on the agency’s torture program.

“It took me and my lawyers a full year to get [the media] to stop calling me ‘CIA Leaker John Kirakou,” he says.

“That’s how long it took for me to be called a whistleblower.”

Kirakou’s crime was talking to ABC News and the New York Times about the CIA’s torture program. For talking to American journalists about the CIA, our federal government charged Kiriakou with espionage. That absurd count was ultimately dropped, but he still did 23 months at FCI Loretto in Western Pennsylvania.

When Kiriakou first saw the “whistleblower complaint,” his immediate reaction was to wonder what kind of “CIA officer” the person in question was.

“If you spend a career in the CIA, you see all kinds of subterfuge and lies and crime,” he says.

“This person went through a whole career and this is the thing he objects to?”

It’s fair to wonder if this is a one-person effort. Even former CIA official Robert Baer, no friend of Trump, said as much in an early confab on CNN with Brooke Baldwin:

BAER: That’s what I find remarkable, is that this whistleblower knew about that, this attempt to cover up. This is a couple of people. It isn’t just one.

BALDWIN: And on the people point, if the allegation is true, Bob, what does it say that White House officials, lawyers, wanted to cover it up?

BAER: You know, my guess, it’s a palace coup against Trump. And who knows what else they know at this point.

That sounds about right. Actual whistleblowers are alone. The Ukraine complaint seems to be the work of a group of people, supported by significant institutional power, not only in the intelligence community, but in the Democratic Party and the commercial press.

In this century we’ve lived through a president lying to get us into a war (that caused hundreds of thousands of deaths and the loss of trillions in public treasure), the deployment of a vast illegal surveillance program, a drone assassination campaign, rendition, torture, extralegal detention, and other offenses, many of them mass human rights violations.

We had whistleblowers telling us about nearly all of these things. When they came forward, they desperately needed society’s help. They didn’t get it. Our government didn’t just tweet threats at them, but proceeded straight to punishment.

Bill Binney, who lost both his legs to diabetes, was dragged out of his shower by FBI agents. Jeffrey Sterling, like Kiriakou, was charged with espionage for talking to a reporter. After conviction, he asked to be imprisoned near his wife in St. Louis. They sent him to Colorado for two years. Others tried to talk to congress or their Inspectors General, only to find out their communications had been captured and cc’ed to the very agency chiefs they wanted to complain about (including former CIA chief and current MSNBC contributor John Brennan).

The current “scandal” is a caricature version of such episodes. Imagine the mania on the airwaves if Donald Trump were to have his Justice Department arrest the “whistleblower” and charge him with 35 years of offenses, as Thomas Drake faced. Trump incidentally still might try something like this. It’s what any autocrat of the Mobute Sese Seko/Enver Hoxha school would do, for starters, to mutinying intelligence officials within his own government.

Trump almost certainly is not going to do that, however, as the man is too dumb to realize he’s the titular commander of an executive branch that has been jailing people for talking too much for over a decade. On the off chance that he does try it, don’t hold your breath waiting for news networks to tell you he’s just following an established pattern.

I have a lot of qualms about impeachment/“Ukrainegate,” beginning with this headline premise of the lone, conscience-stricken defender of democracy arrayed against the mighty Trump. I don’t see it. Donald Trump is a jackass who got elected basically by accident, campaigning against a political establishment too blind to its own unpopularity to see what was coming.

In 2016 we saw a pair of electoral revolts, one on the right and one on the left, against the cratering popularity of our political elite. The rightist populist revolt succeeded, the Sanders movement did not. Ukrainegate to me looks like a continuation of Russiagate, which was a reaction of that defeated political elite to the rightists. I don’t feel solidarity with either group.

The argument that’s supposed to be galvanizing everyone right now is the idea that we need to “stand up and be counted,” because failing to rally to the cause is effectively advocacy for Trump. This line of thinking is based on the presumption that Trump is clearly worse than the people opposing him.

That might prove to be true, but if we’re talking about the treatment of whistleblowers, Trump has a long way to go before he approaches the brutal record of the CIA, the NSA, the FBI, as well as the cheerleading Washington political establishment. Forgetting this is likely just the first in what will prove to be many deceptions about a hardcore insider political battle whose subtext is a lot more shadowy and ambiguous than news audiences are being led to believe.

An ugly open overnight – on limited China trade deal – was auto-bid my the machines to make things look a little better as US trader walked in this morning. But three notable events triggered swings in stocks (as underlying it all was Washington chaos).

First, Fed repo demand picked up again – not what was expected after month-/quarter-end.

Source: Bloomberg

Second, Larry Kudlow commented that delisting China stocks was “off the table” – igniting momentum and sending stocks back to unchanged.

Third, China made headlines confirming nothing but what it said over the weekend that a partial deal was possible, sparking another impulse higher (despite Navarro and Trump dismissing it as potentially a deal).

It feels like desperation to keep stocks higher…

A look at futures (ignoring Friday’s bad-is-good squeezefest for a second) shows the pump and dumps…

Thanks to two short-squeezes…

Source: Bloomberg

And Yuan is even more sensitive as markets await the end of Golden Week…

Source: Bloomberg

European stocks ended higher, lifted considerably once US opened…

Source: Bloomberg

US equities chopped around all day but ended with an ugly close in the red… S&P was weakest on the day

All the US majors ended below critical technical levels…

And we note that Small Caps (Russell 2000) confirmed a death cross (50DMA crossing below the 200DMA)…

Source: Bloomberg

The odds of a US-China trade deal continue to slide…

Source: Bloomberg

Treasury yields were all higher on the day with the short-end underperforming…

Source: Bloomberg

The yield curve flattened…

Source: Bloomberg

The market shifted a little more hawkish today – erasing ISM Services dovish bias…

Source: Bloomberg

The dollar ended marginally higher on the day, but remained in a tight range…

Source: Bloomberg

Cryptos rallied throughout the day, led by Ripple…

Source: Bloomberg

As Bitcoin scrambled to get back above $8000…

Source: Bloomberg

PMs were lower on the day, oil pumped’n’dumped…

Source: Bloomberg

WTI managed to tag a $54 handle before tumbling back to unch…

Source: Bloomberg

Gold opened higher on the China ‘limited’ deal disappointment, was dumped at the European open, then dumped again on the China headlines later in the day – but didn’t reverse like stocks…

Source: Bloomberg

But don’t forget, Golden Week is almost over…

Source: Bloomberg

Finally, some are starting to wonder if this is having an impact on stocks…

Source: RCP

And here’s why that is overall negative for stocks… Warren is the least stock market friendly Democrat…

Which really shouldn’t be a huge surprise as money has been leaning that way for a while – OR…

As it the fact that Hillary is now in 3rd place (at PredictIt) that really freaked the markets out?

pic.twitter.com/r8MapHdQ4d

— Zr1Trader (@ZR1Trader) October 7, 2019

 

Authored by Matt Agorist via The Free Thought Project,

On September 30, the FBI issued a press release noting they have published their 2018 crime statistics. Most notable about the report is the fact that despite constant fear mongering by the mainstream media and the government that crime is running rampant, the number of violent crimes decreased 3.3 percent as compared to the previous year. Also contained in the report were the numbers and causes of deaths in murder cases. Although the FBI did not make the comparison themselves, when reading the data we can see the number of murders carried out with knives or cutting devices was five times higher than the number of murders carried out with rifles. This comparison is particularly important given the current gun climate in America.

Before we go on, it is important to mention that handguns were responsible for the majority of firearms deaths. It is also important to point out that all firearms deaths combined made up the majority of all murders in the United States. Of the 14,123 murders in 2018, 10, 265 of them involved firearms—a 7 percent drop from the previous year. That being said, the number of rifle deaths is extremely important given that this is the weapon most often targeted by gun grabbers.

“Hell, yes, we’re going to take your AR-15, your AK-47,” Democratic presidential candidate Beta O’Rourke recently said to a crowd in Houston, Texas. “We’re not going to allow it to be used against our fellow Americans anymore.”

But as the statistics show, it really isn’t being used against that many Americans. In fact, far more Americans are dying by knives. According to the FBI data, 1,515 were stabbed, cut, or maimed to death by a knife or other cutting instrument. This is a number 5 times higher than those killed by rifles, which sits at just 297.

What’s more, twice as many people were beaten to death with hands, fists, and feet (672) than were killed by rifles. And, nearly 150 more people (443) were bludgeoned to death with hammers and other blunt objects than killed with rifles.

The weapon most often targeted by gun grabbers appears to play a rather tiny role in the majority of murders carried out in the United States. This is in spite of Americans owning around 16 million AR style rifles.

Another important fact is that the FBI data does not differentiate as to what kind of rifle was used in the murder—meaning that it is not likely that all 297 rifle deaths were caused by AR type rifles. The FBI data includes all rifles — including bolt action, pump or lever action rifles — not just AR-15s.

If we were to compare stabbings to just AR-15 rifle deaths, that disparity would more likely than not be even greater.

Knowing these facts about rifles makes the gun grabbers calls for taking your AR-15s that much more hollow. Even if they were able to disarm all Americans of their AR-15 rifles, this would have little to no effect on the number of total murders.

Perhaps this is the reason the right has joined the left in pushing for red flag gun laws which “take the guns first” and  “go through due process second,” as Donald Trump famously said last year after the Parkland shooting.

But would grabbing guns from people deemed a risk by the state actually have any effect on mass violence? Not likely.

Stronger background checks would have little to no effect on mass shootings as most of the mass shooters acquire their guns legally and pass the background checks. As Reason points out:

The elements of that legislation are mostly window dressing that would do little or nothing to prevent attacks like these. The most frequently mentioned policy, “universal background checks,” is plainly irrelevant to these particular crimes, since both the El Paso shooter and the Dayton shooter purchased their weapons legally, meaning they did not have disqualifying criminal or psychiatric records. Nor do the vast majority of mass shooters, who either passed background checks or could have. Neither requiring background checks for private transfers nor creating “strong background checks,” as President Donald Trump has proposed (perhaps referring to the same policy), would make a difference in such cases.

But what about red flag laws that take guns from people deemed a risk?

Citizens who are targeted by these laws will be deemed guilty first and only after their guns are taken, will they have a chance to defend themselves in court. This is the de facto removal of due process.

As Reuters reports, under the legislation, a family member or law enforcement officer could petition a judge to seize firearms from a person they think is a threat to themselves or others. The judge could then hold a hearing without the targeted person being present and grant a temporary order for 14 days.

Under the fifth and fourteenth amendments, due process clauses are in place to act as a safeguard from arbitrary denial of life, liberty, or property by the government outside the sanction of law.

In spite of what officials and the media claim, when a person is stripped of their constitutional rights, albeit temporarily, without being given the chance to make their own case based on what can be entirely arbitrary accusations, this is the removal of due process. And, it doesn’t work.

We’ve seen this play out before already. Earlier this year, a tragedy unfolded in California as a deranged gunman, Kevin Douglas Limbaugh, walked up on an innocent woman, officer Natalie Corona, pulled out his guns and began shooting her repeatedly until she died. Limbaugh then fired several more shots at others before turning the gun on himself and taking his own life. Had more people been nearby, Limbaugh would’ve likely carried out a mass shooting.

Limbaugh’s case is important to bring up due to the fact that — before he killed a cop — he was subject to California’s “red flag” laws in 2018. Limbaugh was given a high-risk assessment that ordered him to turn in his registered weapons to police, the only one being a Bushmaster AR-15. On November 9, Limbaugh turned in the weapon.

Despite being banned from possessing a weapon, he still obtained one illegally and used it to commit murder.

Perhaps this push for taking AR-15s from law abiding citizens is a strategical one. Despite being used in very few murders, the AR-15 is an extremely effective deterrent against tyranny.

“The most foolish mistake we could possibly make would be to allow the subjugated races to possess arms. History shows that all conquerors who have allowed their subjugated races to carry arms have prepared their own downfall by so doing. Indeed, I would go so far as to say that the supply of arms to the underdogs is a sine qua non for the overthrow of any sovereignty. So let’s not have any native militia or native police.”

– Adolf Hitler, Hitler’s Table Talk, 1941-1944: Secret Conversations

Prince Andrew is now claiming that his star-studded 2010 trip to stay with Jeffrey Epstein in New York was to end their decades-long friendship, according to the Sunday Times of London. 

During the visit, Epstein threw the Queen’s second son a party in the mansion’s second-floor dining room. In attendance were “TV anchor Katie Couric, once the highest-paid female presenter in the US, sat alongside comedian Chelsea Handler, a close friend of Gwyneth Paltrow and Jennifer Aniston. Also there was George Stephanopoulos, a former White House communications director under President Bill Clinton turned £15 million-a-year ABC News host,” according to the Daily Mail.

The soiree is believed to have also been attended by Ghislaine Maxwell, daughter of the disgraced media tycoon Robert Maxwell and Epstein’s one-time girlfriend.

Multiple Epstein accusers have claimed that Ms Maxwell ‘procured’ girls for the perverted millionaire. She denies the allegations.

Guests would have walked past bizarre erotic artwork en route to the dining room with its gleaming mahogany table, including a painting of Bill Clinton in red heels and a blue dress, a reference to the outfit worn by Monica Lewinsky when she performed a sex act on him. –Daily Mail

Let’s back up a second… ABC News chief anchor and political correspondent George Stephanopoulos had no problem hanging out at a convicted pedophile’s house, after everyone knew Epstein was a registered sex offender. Stephanopoulos has denied being friends with Epstein, however that didn’t stop him from breaking bread with the notorious child abuser. 

Also seen at Epstein’s pad on multiple occasions during Andrew’s visit were accused pedophile Woody Allen and his wife, Soon-Yi Previn (who ex-wife Mia Farrow adopted when she was eight years old), according to the Mail. 

Andrew issued a statement in August claiming he’s totally innocent and never saw Epstein do anything illegal.

“At no stage during the limited time I spent with him did I see, witness or suspect any behavior of the sort that subsequently led to his arrest and conviction,” said Andrew. 

We assume this includes the Lolita Express flight Andrew took with the former Miss Russia, Anna Malova (according to court records). 

As we noted in August, Maybe Andrew also saw nothing during his guest appearance on infamous UK pedophile Jimmy Savile’s show “Jim’ll Fix It,” when an eight-year-old girl asked to visit a warship.