Russian Stocks Hit 8 Year High – Up 55% Since White House Said “Sell”

Perfectly bottom-ticking the Russia stock market in March 2014, The White House’s Jay Carney suggested investors “not invest in Russian equities right now.” Since then MICEX has soared 55% to fresh 8-year highs (closing in on record highs) and is the best-forming asset since the March 2009 lows.

In March 2014…

Which was followed by a 55% surge to fresh 8 year highs…

 

Making MICEX the best-performing asset off the March 2009 lows…

 

Perhaps Carney can get a gig as a Valeant analyst?


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Crude Extends Losses As US Oil Rig Count Rises For First Time In 3 Months

For the first time since mid-December, the US oil rig count increased (by 1 to 387) tracking a lagged crude price perfectly. The total rig count dropped to a fresh record low (-4 to 476). The early weakness in WTI Crude is extending on this news…

First rise in 12 weeks…

 

But the total rig count tumbled to fresh record lows…

 

The reaction was extnding the losses…


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Another financial institution joins the rebellion, stockpiles cash and gold

Last year, amid all the madness in financial markets, financial historian and strategist Russell Napier joked about creating a “European high-yield capital guarantee fund.”

His “high-yield” fund was nothing more than a secure room filled with physical cash, and a guy standing outside with a gun to guard it.

As jokes tend to be, this was a sad reflection on reality.

Though physical cash bears no interest, it is considered “high yield” compared to bank balances and government bonds that carry negative rates.

Napier’s joke is now coming true.

Earlier this week, the CEO of Munich Re, the largest reinsurance company in the world, announced that they would start holding 8-digit sums of physical cash and gold in their vaults.

Insurance companies tend to be boring, staid institutions that follow the rules and play the game along with the rest of the financial establishment.

But this move from Munich Re is an all-out rebellion against the central banks who are destroying the financial system with negative interest rates.

A few months ago I wrote to you about the different forms of money in our financial system.

Physical cash, which each of knows and understands well, is one form of money.

Bank deposits are another form of money, and one that is almost exclusively digital. The days where banks held customer deposits in cash inside their vaults are long gone.

Instead, the vast majority of the consumer financial system today is electronic. Credit card payments, bank transfers, etc. all take place in the cloud.

In reality your savings account balance is nothing more than an entry in a bank’s database, stored on a server somewhere in a building with no windows.

So while cash exists in the physical world, bank balances exist only in the digital world.

These are two fundamentally different forms of money. And at the moment they have a 1:1 exchange rate.

You see this every time you go to the ATM machine or make a cash deposit at your local bank. $1 in cash is the same as $1 in your savings account.

But that 1:1 exchange rate is not set in stone. It absolutely can break down.

Think about it—back in 2013 when the government of Cyprus froze ALL of its citizens’ bank accounts, bank balances became instantly worthless.

It didn’t matter how much money you have in your account. If you can’t access, it isn’t worth squat.

Cash became enormously valuable; having the money in your hand was worth far more than a frozen bank account, and demand for physical cash soared.

This is what we’re seeing now.

Negative interest rates are pushing people out of the financial system. Munich Re is only the latest example.

A few weeks ago, I told you about the German Savings Bank Association advising its member banks to hold physical cash in their vaults, instead of paying negative interest to the European Central Bank.

Demand for cash is increasing. More importantly, the rebellion against negative interest rates and central bank madness is increasing.

And this trend has the clear potential to break that 1:1 exchange rate between physical cash and bank balances.

But by the time it happens, it will be too late to get your hands on cash. That’s why holding some now is an absolute no-brainer.

Bear in mind, there are still risks, so holding cash not a 100% solution.

Civil Asset Forfeiture is on the rise and the calls to ban cash are growing louder all the time.

But in conjunction with precious metals and an account at a highly liquid, well-capitalized foreign bank, you can radically reduce the risks that this insane financial system poses to your savings and livelihood.

PS-

Find out more about how to create this Plan B in this week’s video podcast.

Be sure to stick to the end to get access to some special bonus reports and even a chance to win a pile of silver coins.

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A U.S. Department of the Future Is a Really Bad Idea: New at Reason

ModernCrystalBall“I’ll tell you…one thing that no Cabinet has ever had is a Secretary of the Future, and there are no plans at all for my grandchildren and my great grandchildren,” the novelist Kurt Vonnegut groused in 2005. Vonnegut’s comment came up on the public radio show Marketplace this month, when the program asked, “What if we had a Secretary of the Future?” My quick answer: It’s a really stupid idea. Human beings are terrible at foresight, and it would be especially terrible to try marry our purblind premonitions to government power. Reviewing the history of wannabe Secretaries of the Future shows that federal government bureaucrats trying to exercise foresight have recommended and made terrible policy decisions. Given ineluctable human fallibility, the best thing we can do is to let our children and grandchildren make their own plans for the future.

View this article.

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These Illiquid Companies Are Most At Risk During Today’s S&P Rebalance

In addition to today’s opex witching, at the close of trading today the S&P will conduct its quarterly index rebalance changes. As Credit Suisse notes, there are no constituent changes during this review, only weight adjustments and according to the bank’s adjustments, indexers will need to trade approximately $14.5bn to move to new index weights, of which $13.3 billion will take place in the S&P, accounting for 0.7% of the total two-way turnover.

Broken down by sector, the EOD flows will be concentrated in the following sectors, with the biggest outflows in Industrials and inflows in Energy and Utilities.

 

Broken down by stock, the biggest winners appear 3 of the 4 FANGs, with some other prominent names found in the list of top 10 index buys. These will be offset by selling in such names as PG, PFE, AVGO and MSFT.

However, the one data set which may be most interesting to traders is the names which are the most illiquid and thus most likely to see material price movement as a result of today’s rebalance. According to CS, it will be the following ten names, 8 of which it calculates will see a net outflow.


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States Make Good Progress on Rape-Kit Testing, But Other Efforts To Secure Justice for Victims May Go Too Far

While campus rape, college activism, and Title IX dominate the national conversation on sexual violence, state lawmakers have been busy introducing reforms that will benefit victims regardless of educational status. Despite the relative lack of attention toward these efforts, there’s a lot to be encouraged by in them, including much progress on processing a backlog of DNA evidence from sexual-assault cases. But there’s also an alarming trend toward removing statutes of limitations for bringing rape cases. 

By far the most widespread legislative momentum is around the collection, testing, and tracking of “rape kits,” the somewhat misnomered name for medical forensic evidence collected in the wake of an alleged sexual assault.

Tens of thousands of rape kits—which contain saliva, semen, and blood samples—sit untested in law enforcement and hospital storage spaces, and until recently they received little attention. There are all sorts of reasons why rape kits went unprocessed, from the legit (the case was closed by other means) to total negligence. An investigation by the Atlanta Journal-Constitution found hundreds of rape kits sitting untested in file rooms at an Atlanta hospital, many of which victims had requested be turned over to police. 

But when a few cities started working through their backlogs, it began producing positive results in terms of DNA matches, including the identification of multiple repeat assailants. In Detroit, for instance, testing a backlog of rape kits identified 477 suspected serial rapists. Testing rape kits has also helped yield exonerations for those wrongly-convicted. Buoyed by this, there’s been a big push at the city, state, and federal level to “end the backlog” of unprocessed rape kits.  

An evidence-collection measure in Idaho just passed this week, creating statewide standards for collecting and tracking rape kits and requiring police to get a county prosecutor’s signoff on any kits they decide not to test. The bill, which now awaits the governor’s signature, has received national attention this week after one county sheriff objected on the grounds that “the majority of our rapes that are called in are actually consensual sex.”

The measure received broad support from lawmakers, however. “The DNA evidence in these kits can be a powerful tool in solving these crimes,” Sen. Maryanne Jordan (D-Boise) told the Associated Press. She said the new rules send “a clear message that victims are to be taken seriously.”

It’s normally no good when politicians speak of legislative “messages,” but I think what Jordan’s words here are worth mulling a moment. Taking victims seriously seems like a wiser version of the popular believe victims mantra, which tends to correct too much for past sins of sexism by requiring absolute deference to any victim’s claims. In contrast, taking victims seriously implies extending accusers as much of a presumption of innocence (i.e., that they are telling the truth) as the accused are extended and—with all the due sensitivity it requires—looking critically at their claims, too.

One prime way to take victims seriously is to not head off investigations and potential prosecutions before they have a chance by mishandling DNA evidence, or leaving its fate to the subjective perceptions of individual police officers or departments. County prosecutorial oversight here doesn’t seem like a huge ask, and while there’s no guarantee that prosecutors won’t err wrongly (in either direction) as well, the added set of eyes here seems at least likely to increase the chances of getting it right. 

Meanwhile, in the Midwest, Ohio law-enforcement agencies were warned by the state Thursday that they have less than a week to submit any unprocessed rape kits for testing, per an Ohio law that took effect March 23, 2015. In addition to requiring agencies to process any untested rape kits, the law also stipulated that new kits must be sent in for testing within 30 days of an alleged assault. Testing can be conducted by state crime labs, in-house testing labs, or accredited private labs.

The Kentucky Senate voted Wednesday to streamline police handling of DNA evidence from rape kits, after an investigation by the former state auditor found more than 3,000 kits sitting untested in a state police lab. That measure now heads to the House. 

Similar efforts are afoot in more than two dozen statehouses, including those in Georgia, Massachusetts, New Jersey, Rhode Island, Oregon, Virginia, and Washington state. The just-passed Virginia proposal would require forensic evidence to be stored indefinitely for felony sexual assault cases and allow rape-kit evidence to be processed even if a victim does not immediately want to press charges. The Washington bill would create a statewide tracking system for rape kits using bar codes. The Oregon bill, which passed this week, gives police departments until January 2017 to develop and submit their own rules for processing rape kits, rather than taking the top-down approach. 

A lot of this is great news. But rape kit testing is expensive, and paying for it has some, like Washington state lawmakers, clamoring to fund the efforts through unfair “sin taxes.”

In some places, the number of untested rape kits may be misleading. When Michigan released a county by county index of untested rape kits, local agencies objected that untested did not necessarily mean un-investigated. Many of the untested rape kits were associated with cases that had been closed, either because a suspect confessed before testing was necessary, a victim opted not to press charges, or police had investigated but attorneys declined to prosecute the case.

There are also privacy and due process concerns. When testing old kits turns up viable genetic evidence, it’s checked against—and added to—the FBI’s national Combined DNA Index System (CODIS). This means that the DNA of some people never suspected or accused of crimes, such as the consensual-sex partners of people who were later assaulted, may now be part of a federal DNA database. 

In addition to rape-kit testing measures, many states are looking to extend, or in some cases entirely do away with, the statute of limitations for prosecuting certain sex crimes. In 2015, Nevada extended its statute of limitations for prosecuting rape from 10 to 20 years. An Oregon bill passed this week entirely lifts the statute of limitation for first-degree sex crimes, and is expected to be signed into law by the governor soon.

In Colorado, a bill co-sponsored by a male Republican senator and a female Democratic representative would add rape to the short list of Colorado crimes (murder, kidnapping, and forgery) which carry no statute of limitations whatsoever. The rationale for these measures is shaky, and seems largely based on the resurgence of old—and unprosecutable—rape allegations against Bill Cosby. Advocates say there must be ways to hold rapists accountable even if it’s decades down the line. 

Removing statutes of limitations could have bad unintended consequences for victims, however, such as discouraging prompt action by prosecutors. And bringing long-past crimes to trial also tends to stack things against the accused.

“If you allow a case to get really old, it skews heavily in the prosecution’s favor,” Richard E. Myers, a former federal prosecutor turned University of North Carolina law school professor, told Quartz. “The defense is more likely to lose witnesses than the prosecution.”

Myers also suggests that social justice precludes prosecuting people for decades-old crimes. “We believe in people rehabilitating,” he said. “Going back twenty years [to prosecute a crime]… feels unfair to many people.”

Ohio’s Supreme Court is currently considering whether DNA evidence processed 20 years after an alleged rape can be used to prosecute the suspect, despite crucial pieces of evidence no longer existing. In the two decades since the DNA evidence was collected, witnesses for the defense had died or moved away, the victim had disappeared, and some evidence had been lost.  

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Friday A/V Club: Fun with Teleportation Machines

If you want a detailed account of the philosophical issues raised by the Star Trek teleporter, you should check out CGP Grey’s The Trouble with Transporters, a YouTube video that came out earlier this month and has been zipping around the Internet since then. It’s smart, it’s fun, it’s short; you should watch it.

But my favorite film about these issues is a lot older than Grey’s video. It’s a cartoon John Weldon made in 1990, called To Be:

For yet another video on the subject—this time from a physics angle—go here. For a novel that touches on the topic (and later was made into a movie that I’m told is good but I haven’t seen), go here. For past installments of the Friday A/V Club, go here.

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Justice Dept. Attempts to Block Newspaper Sale for the Absurdest of Reasons

Kids, have your parents explain what this is.Here’s how absurd federal antitrust interventions have become: Tribune Publishing Company, owner of the Los Angeles Times and several other newspapers, filed for bankruptcy at the height of the recession in 2008 as a result of a plunge in advertising and high debt. Freedom Communications, owner of the Orange County Register and the Riverside Press-Enterprise in Riverside County, California, has filed for bankruptcy twice, in 2009 and just last year, for similar reasons. It used to be a larger chain, built by noted libertarian R.C. Hoiles, but it has since sold off most of its publications.

Freedom Communications’ latest bankruptcy has resulted in the company being auctioned off. Tribune Publishing won the bid with a $56 million offer.

Not so fast, said the Department of Justice. They’re filing suit to stop the purchase because—and try not to laugh at this explanation—they’re concerned about the creation of a newspaper monopoly in Orange and Riverside counties and the impact on advertising and subscription rates.

In 2016. For real:

According to the department’s complaint, filed in federal district court in Los Angeles, the Los Angeles Times and the Register together account for 98 percent of newspaper sales in Orange County and the Los Angeles Times and Freedom’s newspapers together account for 81 percent of English-language newspaper sales in Riverside County.  Tribune’s acquisition of its most significant competitor would give it a monopoly over newspaper sales in each county and allow it to increase subscription prices, raise advertising rates and invest less to maintain the quality of its newspapers.

“If this acquisition is allowed to proceed, newspaper competition will be eliminated and readers and advertisers in Orange and Riverside Counties will suffer,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Newspapers continue to play an important role in the dissemination of news and information to readers and remain an important vehicle for advertisers.  The Antitrust Division is committed to ensuring that competition in this important industry is protected.”   

Wherever will advertisers go if newspapers raise their rates? Wherever they’ve been going since they stopped going to the newspapers over the past 15 years. Here’s what the newspaper advertising revenue market looks like:

Chart

The Department of Justice is attempting to justify intervening by treating the newspaper market as something separate from the media environment as a whole. This reads like an analysis that came from a mass communications textbook that was published in the 1970s. And that’s exactly how the Tribune’s spokesperson responded to the L.A. Times:

“The Division is living in a time capsule, with a framework that predates the arrival of iPhones, Google, Facebook, and modern media outlets that are killing the traditional newspaper industry,” spokeswoman Dana Meyer said in a statement. “It wasn’t competition from the L.A. Times that forced the Register into bankruptcy. It was the Internet and related technology.”

The Times also notes that the Justice Department has said that it doesn’t have any issues with Freedom Communications being sold to Tribune’s own competitors in the region, so the federal government is actively, intentionally or not, threatening the bottom line of a company that has already gone through bankruptcy once. And now they’ll probably have to spend additional money fighting the DOJ.

Were Hoiles still around, he’s probably be disappointed in the way things played out with his former media empire, but he’d be utterly repulsed at the idea that the federal government would exert the authority to determine who had the “right” to own and operate his newspapers. (Though he might also get a kick out of the generally liberal Times being thwarted by the consequences of government intervention in the economy.)

(Full disclosure: Prior to coming to work for Reason, I edited one of Freedom Communications’ smaller California newspapers. It has since been sold off to another media company.)

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Why Two Prominent Bears Refuse To Throw In The Towel And Buy The Rally

One week ago, despite the ECB’s last ditch attempt to reflate the bond market by monetizing corporate bonds in hopes this spills over into stocks (via buybacks) and and broad inflation, Bank of America’s Michael Hartnett was adamant: “sell the rally.” He wasn’t the only one: just a day earlier, after the market’s violent kneejerk reaction lower to the ECB’s (apparent) unwillingness to push rates even lower, Evercore ISI’s chief technician, Rich Ross said “I‘m Out. My Bullish tactical call is over.”

Since then the S&P has only continued its torrid rise higher, and as of this moment is green for the year. So have these two skeptics thrown in the towel and said to buy stocks? No.

Here’s why, first from the “fundamental” Hartnet:

Global Flow Trading Rule: contrarian “sell” signal for risk assets triggered last week on back of massive HY inflows.

 

 

 

We are sellers into strength as Feb despair on 4C’s (China, Commodities, Credit, Consumer) flips to March/April euphoria; today’s new all-time highs for defensive DJTNCG (personal & household goods) index + violent EM bear market rally in EM = uber-barbell of best of breed assets & junk assets best method for H1 outperformance; higher bank stocks & bond yields required to sustain broader risk rally.

With Japanese 10Y yields crashing overnight to all time lows and inverting Japan’s curve, which will force the BOJ to again cut already negative rates even more negative soon, bond yields are unlikely to go higher any time soon.

As for the “technically” bearish Rich Ross, he is close to giving up, but not quite there yet. Here’s why:

Clearly I have been surprised/wrong by the velocity and duration of recent dollar weakness which has singlehandedly reversed the bearish Crude/EM/EMFX/HY narrative which drove equities into the abyss to begin the year. And for now there remains little evidence of any trend exhaustion which would suggest that these powerful cross asset moves have run their course. Admittedly, it only stands to reason that in so far as Dollar weakness and Crude strength persists the world will be a better place for equities. Not all equities however, as Japan and Europe will be negatively impacted relatively by strength in Euro and Yen; EM will of course benefit over DM; and Growth (see Biotech) will feel the pain of Value’s (see Energy) gains.

 

Importantly, while a structural shift in the Dollar’s trajectory would represent a cross asset game changer which forces us to step back from our belief that we are in a cyclical Bear Market, we are not ready to make that call, as there remains little in the chart of the S&P 500 itself which leads us to believe that we are not witnessing a replay of the failed countertrend move from late 2015 or similar Bear Market rallies in both ‘01 and ’08.

 

If the chart of the S&P has taught us anything over the past two years it is that we should become less Bullish into strength and less Bearish into weakness until we break from this range and a new trend emerges. Finally, if pattern and form continue to hold then upside will be limited to 1-2% from current levels (yes I said that 2% ago) and I will abandon my call on a daily close above 2,077-2,086 accordingly.

So only 27 more points before the technicians are stopped out, which could easily take place in the next day or two: recall that Gartman may have already assured that the S&P will rise to 2,118 or effectively new all time highs, at which point he will, as noted yesterday, finally close out his long VIX position.


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Tech Civil Disobedience – Will Apple Engineers Refuse to Follow Unethical Government Orders?

Screen Shot 2016-03-18 at 9.45.37 AM

Must the citizen ever for a moment, or in the least degree, resign his conscience to the legislator?  Why has every man a conscience then?  I think that we should be men first, and subjects afterward.  It is not desirable to cultivate a respect for the law, so much as for the right. The only obligation which I have a right to assume is to do at any time what I think right.

– Henry David Thoreau in Civil Disobedience (1849)

Yesterday, the New York Times published an extremely important article examining whether Apple engineers are prepared to potentially refuse government orders they deem unethical. If so, it would represent a historical and courageous moment of civil disobedience in the spirt of Edward Snowden, Rosa Parks, Martin Luther King Jr., Henry David Thoreau and countless others forgotten by the fog of history. Indeed, if we are to regain any semblance of freedom and liberty, we must rediscover our proud heritage of civil disobedience.

In the modern world, with so much government surveillance being done behind the scenes and via technology, we’ve become increasingly dependent on individuals within the tech sector to stand up and do the right thing. This puts us in a precarious situation, which is why we must be prepared to stand by and support any and all Apple employees who defend our civil liberties against the unconstitutional surveillance leviathan.

We learn from the New York Times:

continue reading

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