Tag: news

When the carrot fails, the stick comes out.

Just a few hours after Donald Trump unexpectedly cancelled the planned June 12 summit with Kim Jong Un, which he called “a tremendous setback for North Korea and indeed a setback for the world”, the president said the U.S. military is ready if necessary in the event of a conflict on the Korean peninsula.

Speaking at the White House not long after releasing the “Dear John” letter to Kim, Trump said he had conferred with Defense Secretary Jim Mattis (who continues to warn anyone who is listening of imminent war), the leaders of South Korea and Japan, and said that the U.S. military is “ready if necessary” and the two Asian allies “are not only ready should foolish or reckless acts be taken by North Korea, but they are willing to shoulder much of the cost of any financial burden” of a conflict.

President Trump says he’s spoken to Sec. Mattis and that the U.S. military is “ready if necessary” after cancelling North Korea summit: “We are more ready than we have ever been before.” https://t.co/mT5oen5Kri pic.twitter.com/XpD5yZ3Ues

— NBC News (@NBCNews) May 24, 2018

Trump’s not so veiled threat came just hours after North Korea’s vice minister of foreign affairs, Choe Son Hui said that if the June 12 talks were called off, the U.S. could instead face off with North Korea in a “nuclear-to-nuclear showdown” threatening to “make the U.S. taste an appalling tragedy it has neither experienced nor even imagined up to now” and called VP Mike Pence a “political dummy” for threatening to use the “Libya Model” (which ended not so well for Muammar Gadaffi) if North Korea does not denuclearize.

Trump also left the door slightly open for a last minute reconciliation, noting that the June 12 summit in Singapore could get back on track, or that he and Kim could meet in the future. However, as Bloomberg reports, the probability of that is virtually nil: 

A senior administration official later downplayed the idea that the meeting could be put back on track for June 12. The North Koreans, the official said, have recently stopped cooperating on preparations for the summit. For example, U.S. officials traveled to Singapore last week expecting to meet with North Korean counterparts, but the North Koreans never showed up.

“They stood us up,” the official said at a briefing for reporters conducted on condition of anonymity.

Trump’s unexpected reversal led to much confusion in the South Korean administration of President Moon Jae-In, who said that peace on the peninsula shouldn’t be abandoned and suggested that Trump and Kim hurt chances for a successful summit by speaking to each other through statements, tweets and spokespeople.

“It’s hard to resolve the diplomatic issue, which is both difficult and sensitive, with current way of communication,” Moon said in a statement. “I wish the leaders would have a more direct and closer conversation to deal with it.

While Trump took a conciliatory tone toward South Korea, he mentioned what some saw as a hint that the talks had fallen apart due to recent Chinese intervention.  Trump said that the dialogue with Kim “was good until recently” and that “Kim Jong Un wants to do what’s right” but, he added, “It’s only recently that this has been taking place and I think I understand why it’s been taking place,” he said cryptically, declining to explain further. But, as Bloomberg points out, Trump said earlier this week that planning for the summit had been proceeding well until Kim met May 8 with his closest ally, Chinese President Xi Jinping, who is negotiating a trade dispute with Trump.

* * *

With the meeting now indefinitely abandoned,  the next steps are unclear. Trump has said the U.S. would continue exerting maximum economic pressure on Kim and his regime, potentially involving the US millitary as was the case for much of 2017. A senior administration official told Bloomberg that the U.S. is still short of maximum pressure on Kim, suggesting the possibility of further sanctions or other actions.

It is also unclear what North Korea’s official response, which is due any moment, will be: the timing of Trump’s letter will certainly be an embarrassment to Kim Jong Un, who made a deliberate show of demolishing its main nuclear-weapons test site before a select group of foreign journalists just hours before Trump sent the letter. The exercise was portrayed as the destruction of tunnels used for all six of North Korea’s nuclear tests, but there was no independent verification that the site was disabled, and furthermore many had said that the site had already collapsed on its own due to structural instability.

“We can expect North Korea will condemn the decision in strong terms and cast blame on the United States for throwing away a good thing through its actions,” said Mintaro Oba, a former U.S. State Department official who worked on North Korean issues. “That does raise concerns that Trump will respond in a way that further escalates tension to ‘fire and fury’ levels and beyond.”

What is clear, is that Russian president Putin made it obvious he was on Kim’s side, saying he was disappointed the planned summit between President Trump and Kim Jong Un was cancelled and said North Korea was not to blame.

“In Russia, we took this news with regret,” Putin said at a news conference with French President Emmanuel Macron, the Associated Press reported. “We had very much counted on it being a significant step in sorting out the situation on the Korean Peninsula and that it would be the beginning of the process of denuclearizing the whole Korean Peninsula.”

Putin also said Kim “did everything he promised in advance,” citing North Korea’s claim that it had destroyed its nuclear testing site.

And so the ball is now in North Korea’s court which, according to most pundits, will respond by blaming Trump, unleashing another round of escalating tit-for-tat jawboning. The only question is whether it will once again culminate with an ICBM being fired by North Korea, and whether the “decapitation” strike which the White House had planned over a year ago, will follow.

via RSS https://ift.tt/2GL8V1K Tyler Durden

Via Global Macro Monitor,

David Stockman tweeted the following Zero Hedge chart this morning.

Clearly, a shift in the supply curve for new homes to the left.

OK  – and some buying at irrational prices fueled by artificially low-interest rates and excess money.  The irrational panic buying will take care of itself as interest rates rise and the Fed reduces its balance sheet making money tighter.

This is not the highly leveraged housing market of 2006-07, where even our range boy at the local golf club owned three mortgaged homes, quit his job, and bought an Escalade financed by a home equity loan (true story).   This market is driven primarily by restricted supply and will be more difficult to pop.  The price adjustment will also take place over a much longer period.

The New Supply-Side Economics Is Not Good

We have written how private equity has taken a yuuuge supply of existing homes off the market through their mega 2012-14 bankruptcy purchases, and now rent out the homes to the same people they foreclosed on.  Existing housing is a perfect substitute for new homes.

Rising Costs

The rising costs of building, primarily labor shortages in the construction sector, and restrictive zoning laws are constraining building and the supply of new homes.

The lack of enough skilled workers and a narrow talent pipeline has added extra hurdles, time, and costs to many current projects, according to builders, hindering the current boom time in the industry.

“The number one issue is the cost and availability of labor,” says Randy Strauss, owner of Strauss Construction in Amherst, Ohio, roughly 40 miles east of Cleveland.

The issue is a nationwide one. Contractors in areas such as Houston, which were battered by Hurricane Harvey last year, have struggled to staff up, and the National Association of Home Builders recently found that 82 percent of its members believe the cost and availability of labor are their biggest issues. In 2011, only 13 percent named labor costs as their biggest worry.  — Curbed

The immigration crackdown has played a significant role in the labor shortage in the construction sector.

One study from the National Bureau of Economic Research found that over 1.1 million undocumented immigrants, many of them skilled in essential trades such as framing, work in the construction industry.  –  CITYLAB

Lumber Prices

The parabolic rise in lumber prices isn’t helping either.  Lumber prices are down over 12 percent from last week’s high, however, with several days of limit down in the futures markets.  Look no further than the long-term lumber price chart to understand what tariffs do to prices and input costs, which ultimately hurt the majority.

Last April, the Trump administration placed a 20.83 percent tariff on Canadian lumber, to the benefit of politically valuable voters in Maine. Within the construction industry, these imports commonly turn into framing lumber, which is used to build single-family homes and small multifamily buildings.
– CITILAB

Bad timing by the administration unless you belong to the small minority of those who make their living in the framing lumber business.

Policy Relief Needed

Shortages are breaking out and are now ubiquitous throughout the economy.

The housing market is one of the hardest hit sectors.  Shortages of new and existing homes; shortages of buildable land, shortages of skilled construction workers.  Inflation is running rampant in the sector.  Yet it hardly registers in the inflation indices because of the way the government measures housing costs.

The new supply-side of housing (shifting the curve left)  is not working for most Americans.  Taking existing homes off the market for rentals or the restriction of new supply through rising input costs, labor shortages, and zoning restrictions are severely reducing affordability and turning the country into a  Landlord Nation.

Since most of the problems are policy-induced, they can be fixed by better and a more comprehensive housing policy.   That is getting back to the old supply-side economics of the Reagan era where the supply curve shifts to the right, illustrated in the simple graph below.  Lower prices with more supply of homes (P 2, Q 2).

Higher prices and lower supply may work for some, but it is certainly not good economics and only adds to an already toxic political environment.

It is time for disruption in housing.

via RSS https://ift.tt/2LtaZ23 Tyler Durden

The Woods Hole Oceanographic Institution (WHOI), a private/non-profit marine exploration organization established in Cape Cod, Mass., received authorization by Maritime Archaeology Consultants (MAC), and Colombian officials to released new information from the successful discovery of a 62-cannon, treasure-loaded Spanish galleon known as the “holy grail of shipwrecks.”

 San José’s cannons, engraved with the dolphins that confirm the ship’s identity. (Source: WHOI)

The San José sank in the early 18th century with dozens of sailors and treasure chests – stacked with precious metals and emeralds mined in Peru during a battle with British ships in the War of Spanish Succession, said WHOI. In today’s dollars, the treasure could be worth more than $17 billion dollars.

The legendary wreck was discovered off the coast of Cartagena, Colombia, in late 2015, by a team of seasoned international scientists and engineers during a voyage aboard the Colombian Navy research ship ARC Malpelo led by MAC’s Chief Project Archaeologist Roger Dooley.

The wreckage was discovered about 600 meters below the surface with an underwater drone called REMUS 6000, owned by the Dalio Foundation, and operated by Woods Hole Oceanographic Institution (WHOI).

“The REMUS 6000 was the ideal tool for the job, since it’s capable of conducting long-duration missions over wide areas,” said WHOI engineer and expedition leader Mike Purcell.

Finding high-profile wrecks is nothing new for the underwater drone, which played a critical role in finding the wreckage of Air France 447 in 2011 and helped map the Titanic wreck site in 2010.

To confirm San Joséa’s identity more than 600 meters underwater, REMUS “descended to just 30 feet above the wreck where it was able to capture photos of a key distinguishing feature of the San José—its cannons,” said WHOI. Bronze cannons with engraved dolphins confirmed it was in fact “the holy grail of shipwrecks.”

“The wreck was partially sediment-covered, but with the camera images from the lower altitude missions, we were able to see new details in the wreckage and the resolution was good enough to make out the decorative carving on the cannons,” said Purcell. “MAC’s lead marine archaeologist, Roger Dooley, interpreted the images and confirmed that the San José had finally been found.”

Bronze cannons discovered the Remus 6000 at the bottom Caribbean Sea. (Source: WHOI) 

Teacups from the San José found on the ocean floor. (Source: WHOI)

“Once again, WHOI’s expertise in drone technology and operations has resulted in an important discovery,” said WHOI Vice President for Marine Facilities and Operations Rob Munier.

“We are pleased to have played a part in settling one of the great shipwreck mysteries for the benefit of the Colombian people and maritime history buffs worldwide. We look forward to our continued involvement to answer the basic oceanographic research questions associated with the find,” Munier added.

While the shipwreck still remains a mystery to many, the exact claim to the billions of dollars of precious metals and gems was not immediately apparent.

Excited to be part of modern-day treasure hunting and other explorations made possible by new technologies that are opening worlds were closed to us. Ocean exploration is thrilling. See for yourself at @AMNH for Unseen Oceans or the giant screen film, Oceans: Our Blue Planet. https://t.co/9G3eptSQoG

— Ray Dalio (@RayDalio) May 24, 2018

 Colombia and Spain have declared ownership of the treasure. WHOI explains they are explorers, not treasure hunters, and will not be caught up in what is expected to be lengthy international court battle of who receives ownership.

via RSS https://ift.tt/2IJktbK Tyler Durden

Submitted by Matt P. of The Political Insider,

Black Lives Matter activist Shaun King is something of a male Rachel Dolezal, the former NAACP chapter leader who was exposed for lying about being black. He too has been caught lying about being black, as his birth certificate lists two white parents – which King explained away by claiming that he doesn’t know who his real father is (which begs the question as to why he thought he was black). Dolezal’s lies have all-but ruined her life, but King remains a prominent activist with millions of followers who believe everything he says.

King has lied about a lot over the years. He rose to prominence as a columnist for the New York Daily News, writing a notable column following the Michael Brown shooting, in which he, a man with no forensics experience whatsoever, analyzed the scene where Michael Brown was shot. He concluded that the officer who shot Brown was in no danger. Every other forensic analysis (i.e. the kind admissible in court) disagreed.

In a self-help book King authored, he recounts when he was the victim of a hate crime by a racist mob of “self-described rednecks,” leaving him a “bloody mess on the floor” and “physically ruined.” Police reports and witness statements describe King’s wounds as minor and say the fight was mano-a-mano between King and another man over a girl. King turned a lost fight into a fake hate crime.

And this week, decades later, King would lie about another hate crime.

As the Daily Caller reported:

Shaun King accused a Texas state trooper of assaulting a woman and threatening to shoot her black fiancé before a body camera video released Wednesday contradicted those claims.

Lawyer S. Lee Merritt found evidence showing a police officer assaulting Sherita Dixon-Cole during a May 20 traffic stop, King told his Twitter followers in a May 20 tweet. King then claimed Officer Daniel Hubbard threatened to shoot the woman’s fiancé.

However, the video found no evidence to support the allegations, Texas’ Department of Public Safety  said and provided the video to the Ellis County District Attorney’s Office. Merritt, the attorney for Dixon-Cole, accepted the findings and said Hubbard “should be cleared of any wrongdoing.”

Watch the video below:

And compare that to King’s hysterical social media postings beforehand:

Over 80,000 people shared his lie on Facebook before he removed his post.

After the bodycam footage was released, King addressed the new reality, publishing an essay outsourcing all the blame to Sherita Dixon Cole. Nowhere in the essay do we hear the words “sorry” to the officer that King accused of sexual assault and kidnapping, which resulted in an internet mob harassing the officer and his family.

Shaun King won’t face any repercussions for this among his following of sheep – but when it comes to false sexual assault accusations, the courts would certainly see things differently if King gets himself sued over this. At least one attorney has offered his services pro-bono.

Hey @ShaunKing, aka Talcum X, when are you going to apologize for falsely accusing a Texas state trooper of raping and kidnapping a black woman? Entire story was a lie. I hereby offer free legal service to that trooper if he wants to bankrupt you.

— Clay Travis (@ClayTravis) May 23, 2018

Let’s hope Officer Hubbard takes him up on that offer.

via RSS https://ift.tt/2IKQCj6 Tyler Durden

FBI informant Stefan Halper, who infiltrated the Trump campaign for the FBI during the 2016 election for the purposes of espionage, said that Russians had infiltrated the University of Cambridge where he works – allegations which those involved say are “false” and “absurd.” 

Halper made the “false allegations” in December 2016 about a Russian co-worker based on her interactions with former national security adviser Michael Flynn at a February 2014 Cambridge Intelligence Seminar (CIS) – while Flynn was President Obama’s Director of the Defense Intelligence Agency (DIA). 

A historian and Russian intelligence researcher at Cambridge, Svetlana Lokhova, told TheDCNF that Halper is behind allegations made about her and Flynn during the retired general’s visit to Cambridge in 2014, when he served as director of the Defense Intelligence Agency. –Daily Caller

“Stef Halper, who is currently under [Department of Justice] investigation for his activities, has been revealed by [The New York Times] as the source of the false allegations about me and General Flynn,” said Lokhova, a British citizen who was born in Russia.

Halper told the Financial Times that he was quitting the CIS due to “unacceptable Russian influence on the group,” which as the Daily Caller notes, “The evidence of Russian penetration was scant, with news reports citing a nearly $2,700 contribution to CIS from a Russia-based company called Veruscript.”

Here’s what we know about Stefan Halper’s past claims about Russian infiltration. “He sees a Red under every bed,” is what one source told me. https://t.co/w5yvSCgSzq @dailycaller

— Chuck Ross (@ChuckRossDC) May 24, 2018

Prof Andrew, whose books on the KGB are among the most exhaustive on the history of Russian information warfare as well as the infamous Cambridge spy ring of the 1930s, said the suggestion of a Russian covert operation to compromise the seminar was “absurd”.

The seminar is “entirely unclassified” Prof Andrew pointed out, adding that the new Journal of Intelligence and Terrorism was not formally affiliated to the gathering.

The seminar, established by Christopher Andrew, the official historian of MI5 and former chairman of the history faculty at the university, is one of the most respected networks in its field. –FT

The 73-year-old American who split his time between his Virginia farm and teaching at Cambridge, approached several Trump campaign aides during the 2016 US election for purposes of espionage – on behalf of the FBI, headed at the time by the recently very quiet James Comey. Halper continued to spy on Trump campaign aide Carter Page well after the election, and now we find that he was trying to infiltrate the Trump administration. 

In short:  

• The FBI recruited Halper to spy on the Trump campaign in the summer of 2016
• After forming relationships with two Trump campaign aides, Halper invited one of them, George Papadopoulos, to work on a policy paper in London, where the 73-year-old professor/spy brought up Russian emails
• Halper approached Trump aide Carter Page during an election-themed conference at Cambridge on July 11, 2016. The two would stay in contact for the next 14 months, frequently meeting and exchanging emails.
• Then, after the election, Halper reportedly tried to infiltrate the Trump administration, pushing for a job in the State Department, according to Axios. 

Halper, a Clinton supporter, former government official and longtime spook for the CIA and FBI, was outed as the FBI informant who infiltrated the Trump campaign after the Washington Post and the New York Times ran reports that corroborated a March report by the Daily Caller detailing Halper’s outreach to several low-level aides to the Trump campaign, including Carter Page, George Papadopoulos, and a cup of coffee with campaign co-chair Sam Clovis. 

Halper, 73, cut a colorful figure as he strolled through diplomatic, academic, and espionage circles, having served in the Reagan, Ford, and Nixon administrations. –Daily Mail

These contacts are notable, as Halper’s infiltration of the Trump campaign corresponds with the two of the four targets of the FBI’s Operation Crossfire Hurricane – in which the agency sent counterintelligence agent Peter Strzok and others to a London meeting in the Summer of 2016 with former Australian diplomat Alexander Downer – who says Papadopoulos drunkenly admitted to knowing that the Russians had Hillary Clinton’s emails.

Downer – the source of the Papadopoulos intel, and Halper – who conned Papadopoulos months later, are linked through UK-based Haklyut & Co. an opposition research and intelligence firm – founded by three former British intelligence operatives in 1995 to provide the kind of otherwise inaccessible research for which select governments and Fortune 500 corporations pay huge sums. 

Downer – a good friend of the Clintons, has been on their advisory board for a decade, while Halper is connected to Hakluyt through Director of U.S. operations Jonathan Clarke, with whom he has co-authored two books. (h/t themarketswork.com)

And what’s this? 

Literally just a picture of Stefan Halper and Alexander Downer from 2010 with an associated video.https://t.co/RoT0fA2fCf pic.twitter.com/MOdFqoQUkd

— The_War_Economy (@The_War_Economy) May 24, 2018

 The bait and the switch in the same room…

via RSS https://ift.tt/2J8a2Oo Tyler Durden

Authored by Zachary Petrizzo via Campus Reform,

I am leaving Marquette University due to the rampant political bias on campus and the school’s growing separation from the Catholic Church.

When I made the decision to attend college, I wanted to be a part of a community of learners that pushed boundaries, yet still held the values of the Catholic Church in high regard. I applied to many types of schools—East and West coast, large and small, with many in the middle.

One component I always returned to was the idea of faith being the cornerstone of the institution, because it is something I wanted to incorporate into my higher education experience. I remember sharing this idea many times with my parents and knowing that it was my calling to continue to be at an institution that held the same values as I.

Marquette University would be something new for me—a new adventure in a new state. It is a Jesuit and Catholic institution, which was one of the largest factors that prompted me to accept the opportunity to enroll.

After one year at the institution, however, I have discovered that Marquette is anything but a Jesuit and Catholic university. There is no acceptance of conservative thoughts, let alone “diversity of thought,” and opinions that I support are frequently shut down in the classrooms. 

I remember vividly a Comparative Politics class during which I mentioned that I found merit to the idea of building a border wall, only to be verbally rebuked by the professor for my opinion.

At one point, several professors hung Planned Parenthood signs on their office doors, yet the same administrators who are always quick to warn students against “microaggressions” still have not even issued a statement affirming the school’s pro-life values. 

Dr. Ed de St. Aubin, a psychology professor at Marquette, perhaps put it best when he told The College Fix that “We are not a seminary.” 

This is exactly what is wrong with the institution in my opinion. Putting our faith and heritage in a box and saying it can only be practiced in this setting. Our faith should be intertwined in each class and throughout daily life at the university.

The firing of Dr. John McAdams has also inspired a great amount of concern among conservative students and professors, as it has shown that speaking one’s mind, at least when it doesn’t involve pandering to leftist ideas, can lead not only to the typical accusations of racism and bigotry, but can even jeopardize one’s very livelihood. 

In McAdams’ case, he was put on indefinite suspension and told to issue a formal apology after he wrote a post on his personal blog reporting that a graduate student instructor had forbidden students from discussing gay marriage in class because it would be “homophobic” for someone to express opposition to the concept.

I spoke out against the university in a video produced by the law firm representing McAdams, the Wisconsin Institute of Law and Liberty, pointing out the hypocrisy of ignoring professors who hang Planned Parenthood signs and bash the Catholic Church yet punishing a professor simply for revealing another instructor’s efforts to silence criticism of gay marriage.

Although I was never called out directly for the post, university officials would thereafter ignore my presence and avoid me even when I would encounter them on campus and offer a polite greeting.

Prior to that, I would frequently take opportunities to meet with university officials, including President Lovell and others. I found it important to share my thoughts about the direction the university should pursue, but I frequently found that administrators were more inclined to be obstructionist toward conservative students who wished to organize on campus. 

Two policies that were put into effect in the past month, for instance, undermine the core values of the institution. 

The new graduation requirement cuts the required English and Theology classes from two down to one, while the Theology classes no longer focus on doctrine of the Church, but rather on contemporary social justice causes in Milwaukee. 

Moreover, the new student organization policy sent down by the office of Student Affairs looks to mandate a faculty advisor for each student organization on campus, which many conservative organizations believe is an underhanded way of silencing them, now that they have been put on notice—With the firing of Dr. McAdams, many professors have expressed privately to me their worries about speaking or putting their name on anything that has a conservative bent.

In December, I became Chairman of the Marquette University College Republicans and an Advisor to Marquette for Life, the pro life organization on campus, but I quickly found that this just made me a target.

From that point on, I hated going to class; students would yell “warnings” to others in the hallways, shouting “trigger warning” among other names. Simply because I disagreed with them? I suppose so.

I vividly recall a situation back in March, when two students approached me on a sidewalk and warned me that if I ever entered the Intercultural Center, I—and my family—would be “hunted down.”

These incidents were all reported to the university police department after speaking to my parents about the confrontation, but to no avail.

In May of 2018 I would decide to not return to Marquette, and decision I addressed in an open letter to the administration.

Currently, I am seeking admissions to universities in the Washington D.C. area while interning at National Electrical Contractors Association this summer. 

via RSS https://ift.tt/2J39A3U Tyler Durden

One of our favorite charts which certainly is worth 1,000 words or more (and which we last showed just 2 days ago), is the following from Bank of America Chief Investment Strategist Michael Hartnett, which shows that not only does every Fed tightening cycle end with a financial “event”, a polite banker word for crash…

… but it even hints at what fed funds rate the next crash will happen.

Another favorite charts is this one, also from Hartnett, which shows that the liquidity supernova which has been the sole driver behind one of the longest artificial “bull markets” in history, is rapidly fading and when the world central bank balance sheets peak in mid-2018, they will then start contracting resulting in an explosion in volatility as an entire generation of traders has no idea how to “trade”, i.e. sell in addition to buy, in the absence of training wheels.

The result is a 100% guaranteed crash, the only question is when and how severe.

While this assessment may be simple, it is also correct, as a whimsical overnight essay by Deutsche Bank’s chief macro strategist Alan Ruskin notes, in which among many other things, the Deutsche Banker says what are arguably the 8 smartest words in finance: “we should not over complicate the macro picture.”

So what does one get when one simplifies all the unnecessary noise? 

Ruskin’s answer is below:

A starting point should be that every Fed tightening cycle creates a meaningful crisis somewhere, often external but usually with some domestic (US) fall out. Fed tightening can be likened to the monetary authorities shaking a tree with some overripe fruit. It is usually not totally obvious what will fall out, but that there is ‘fall out’ should be no surprise.

Going back in history, the 2004-6 Fed tightening looked benign but the US housing collapse set off contagion and a near collapse of the global financial system dwarfing all post-war crises.

The late 1990s Fed stop start tightening included the Asia crisis, LTCM and Russia collapse, and when tightening resumed, the pop of the equity bubble.

The early 1993-4 tightening phase included bond market turmoil and the Mexican crisis.

The late 1980s tightening ushered along the S&L crisis.

Greenspan’s first fumbled tightening in 1987 helped trigger Black Monday, before the Fed eased and ‘the Greenspan put’ took off in earnest.

The early 80s included the LDC/Latam debt crisis and Conti Illinois collapse.

The 1970s stagflation tightening was when the Fed was behind ‘the curve’ and where inflation masked a prolonged decline in real asset prices.

Lest we think there is nothing going on and the Fed has hardly tightened, that is true when it comes to the funds rate, but: i) tightening is coming after extreme and prolonged accommodation; ii) it is taking forms we do not fully understand as major Central Bank balance sheet expansion shifts from 2 trillion USD a year asset expansion to shrinkage in the next year. iii) the US already has the highest 2y, 5y, 10y nominal and real interest rates in the G10 world – a phenomena last mirrored in the great USD boom cycle of 1983-84 when it just so happens the US was pursuing considerable fiscal accommodation and tight monetary policy that was also unique in the G10 world.

The simple point is vol (domestic measures like the VIX and more ‘external’ measures like the CVIX) will take on many forms, but it has a strong pattern of following the Fed by 18-24 months when the Fed raises rates. As an example, at the moment there are a host of idiosyncratic stories in EM that look to be largely tangential victims. Where the US rate cycle is relevant is that the past extreme external policy accommodation can no longer mask domestic issues including valuation extremes like compressed credit spreads. That the USD was going down initially as US rates went up also gave the appearance that ‘this time is different’ and a benign Fed tightening cycle would ensue.

So far, US-specific risk, including apparent risky spots in HYG, have held up comparatively well. In current circumstances, this good US asset news is actually bad news for select (over-ripe) assets abroad because it emboldens and frees the  hand of the Fed to shake the tree more.

In this regard, USD strength is finally tightening domestic financial conditions in the US a little, and is a necessary (but as yet not nearly sufficient) condition to slow the Fed down.

And here is a post script to Ruskin’s essay this morning from our favorite DB credit strategist, Jim Reid:

A reminder that our note from last September suggested that financial crises have been a very regular feature of the post-Bretton Woods system (1971-) and that based on history we’d be stunned if we didn’t have another one in some form or another by around the end of this decade/turn of the next one.

The most likely catalyst was the “great unwind” of loose monetary policy/QE around the world at a time of still record debt levels.

We would stand by this and I suppose the newsflow and events this year so far makes me more confident of this even if we’re still unsure on the timing or the epicentre.

via RSS https://ift.tt/2J75jfM Tyler Durden