Is This Sleeping Dragon Ready To Awaken?

Via Dana Lyons' Tumblr,

The Chinese stock market has been eerily quiet of late – is that about to change?

Outside of a record tight 2-month trading range in stocks this summer, there has been no shortage of market news, stimulus and action so far in 2016. And it has come from all over the globe, from the breakdown in U.S. stocks to begin the year, to their eventual July breakout; from the Brexit shocker to the continued struggles among European banks; and from the re-emergence of emerging markets to the re-awakening of the precious metals complex. But, speaking of re-awakening, one market that has eerily quiet this year, in our view, is China.

This is particularly so in contrast to the manner in which the Chinese stock market captivated the investment landscape over the 18 months prior. Specifically, China’s Shanghai Composite (SSEC) was all the equity rage as it skyrocketed 150% in parabolic fashion from June 2014 to June 2015. Subsequently, market observers were equally riveted by the index’s outright collapse as it lost some 80% of those gains in the 7 months following. Since January, however, the SSEC has traded in roughly a mere 17% range – and has completely avoided the headlines. Perhaps that will soon change as this sleeping dragon may be poised to wake up.

As we see in our Chart Of The Day, the SSEC has been walking up a shallow, rising trendline (on a log scale) since it bottomed in January. The interesting thing is that if you extend the trendline back to the left, it intersects the index’s launch point in June-July 2014. The other pertinent development is that the SSEC is presently testing this trendline once again, just beneath the 3000 level.

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So why would the Shanghai Composite be poised to make more noise soon? In our view, if the SSEC breaks this uptrend, it could be subject to an acceleration of selling pressure based on the break. The January-February lows of this year lie at around 2640 and a test of those lows would signify a 10% drop from current levels. That test could come quickly upon a trendline break. And that would certainly put the market back into the headlines.

Before we anticipate this development, however, we must assume the trendline will hold – until it doesn’t. There is certainly reasonable upside still from last year’s violent unwind of the SSEC’s 2014-2015 moonshot. A retracement closer to the mid-3200 level would have been a modest expectation for this post-January dead-cat bounce. Whether that occurs or not prior to a potential trendline break, we’ve no idea. It would certainly forestall any major headlines on the market.

However, given the shallowness of the uptrend and the inability of the SSEC to generate any distance between itself and the trendline, the odds are fairly good that the line is eventually broken – and this Chinese dragon will begin to roar once again.

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More from Dana Lyons, JLFMI and My401kPro.

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Clemson U. Says Harambe Jokes Are Allowed. It Should Tell Its RAs That.

HarambeHarambe be praised: Clemson University officials now say that students are welcome to post visual representations of the martyred gorilla in public residential places.

This announcement is a reversal of last week’s guidance, sent by a rogue residential adviser, instructing students to stop making Harambe jokes because they “add to the rape culture as well as being a form of racism.”

A spokesperson for Clemson told The Washington Post‘s Eugene Volokh that the earlier prohibition on Harambe jokes “was sent by one person and does not reflect university policy.” Earlier this morning, the university sent me an email with the insistent headline, “Clemson has NOT banned Harambe memes in residence halls.”

Great! Perhaps Clemson should also inform its own residential advisers about the university’s commitment to free speech. As Volokh points out:

I would think that Clemson would have taught residence area authorities that they don’t have the power just to order students not to post certain messages that the authorities dislike; but perhaps Clemson had done so, and the particular e-mailer just didn’t focus on that.

Additionally, it does not seem obvious to me that Harambe-loving students’ free speech rights will actually be respected by the university. After all, Clemson still has a Bias Incident Response Protocol that allows members of campus to report each other for saying and doing things that make them feel demeaned, degraded, or harassed. And people in positions of power at the university evidently believe that Title IX requires them to vigorously police potentially offensive student conduct.

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Neither Trump Nor Clinton Know a Damned Thing About Cybersecurity, and Yes, You Should Be Concerned

PuppetsTo the extent that last night’s debate drifted into concrete policy discussion, it was often a brief trip before the two candidates returned to the evergreen discussion of how awful their opponent is. (Fact check: True)

That’s pretty much what happened during the short section discussing cybersecurity and state-sponsored hacking. Thanks to the hacking of the Democratic National Committee and the possibility that Russians were involved, Hillary Clinton was able to get Donald Trump on the defensive by suggesting he “invited [Vladimir] Putin to hack into Americans.” That was a pretty audacious exaggeration, given that what Trump actually asked for was for the Russian hackers to provide Clinton’s deleted emails from her private server scandal. But when she ended her comments by saying how many national security folks had endorsed her, that was all it took to get Trump off-track to talk about all the wonderful people who had endorsed him.

In reality, neither candidate expressed a vision of cybersecurity that suggested either of them were even remotely familiar with the subject. Asked by moderator Lester Holt how to fight cyberattacks, here was part of Clinton’s response. Note the familiar hawkish tone:

And one of the things [Vladimir Putin’s] done is to let loose cyber attackers to hack into government files, to hack into personal files, hack into the Democratic National Committee. And we recently have learned that, you know, that this is one of their preferred methods of trying to wreak havoc and collect information. We need to make it very clear — whether it’s Russia, China, Iran or anybody else — the United States has much greater capacity. And we are not going to sit idly by and permit state actors to go after our information, our private-sector information or our public-sector information.

And we’re going to have to make it clear that we don’t want to use the kinds of tools that we have. We don’t want to engage in a different kind of warfare. But we will defend the citizens of this country. [Emphasis added] And the Russians need to understand that. I think they’ve been treating it as almost a probing, how far would we go, how much would we do.

By casting this debate in the terms of a hack that essentially embarrassed the Democratic Party establishment, Clinton’s threat comes off as petty as anything Trump says. Trump responded in part by pointing out that what the hack revealed was how terribly the Democratic Party treated Bernie Sanders. That’s what Clinton is threatening a cyberwar over?

Trump, though, didn’t exactly present much of an alternative. When presented with a policy question, his instinct is to simply say things are bad and need to be better. That’s exactly what happened here:

We came in with the Internet, we came up with the Internet, and I think Secretary Clinton and myself would agree very much, when you look at what ISIS is doing with the Internet, they’re beating us at our own game. ISIS.

So we have to get very, very tough on cyber and cyber warfare. It is — it is a huge problem. I have a son. He’s 10 years old. He has computers. He is so good with these computers, it’s unbelievable. The security aspect of cyber is very, very tough. And maybe it’s hardly doable.

But I will say, we are not doing the job we should be doing. But that’s true throughout our whole governmental society. We have so many things that we have to do better, Lester, and certainly cyber is one of them.

It’s probably a bit too much to expect that presidential candidates be cybersecurity experts. We shouldn’t be expecting them to write guest commentaries about zero day exploits.

But what we should take from this—if at all possible—is what kind of experts these people are going to be turning to in the development of cybersecurity policy. For Trump, I have no idea what to expect from this response. Recall that when Apple resisted the Department of Justice when they demanded the company weaken its security to help them break into an iPhone, Trump’s response was that people should boycott the company. He did not seem to care (or possibly even understand) that the reason Apple took the position it took was to protect the data security of those very same customers.

But when we look at Clinton’s responses, we see a person much more inclined to accept the positions of national security officials over those of privacy experts and perpetuating an agenda pushing the desire by intelligence officials to have secret access to online data through its own hacking rather than an agenda in favor of protecting the security of citizen info.

Why does that matter? Besides the obvious problem that Americans are left less secure because our national security state is emphasizing aggression and infiltration over defense, there are other consequences. It may well turn out that the methods that were used by Russian hackers to infiltrate U.S. systems came from a National Security Agency (NSA) employee or contractor who accidentally left his own hacking “tools” available online for others to find. And the NSA, choosing its own priority in having access to information instead of data security, declined to tell communication companies affected by this vulnerability. The NSA essentially allowed a security vulnerability to persist.

These are the kinds of people who will have Clinton’s ear. Her campaign has put out a detailed tech policy plan, though I suspect she would fail a quiz about its own contents. She says she rejects a “false choice between privacy interests and keeping Americans safe.” She supports a proposed commission to try to hash out the massive gap in ideological distance between privacy activists and tech companies trying to protect consumer data and national security officials and law enforcement representatives who want access to information on demand.

Her emphasis on getting support from national security officials suggests that one side is going to get much more attention than the other. Her suggestion that America might launch a cyberwar over basic games of espionage—a very petty one at that—should be a cause for concern.

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There’s only one candidate that can make a difference this election

I used to watch wrestling when I was a kid… I come from the age of Hulk Hogan, Ultimate Warrior, and Randy “Macho Man” Savage.

Huddling close to the television each weekend, my friends and I would cheer for our favorite stars and their signature moves.

My dad ruined it all one day when I was about 6 years old; he pulled me aside and said casually, “You know it’s all fake, right?”

I was stunned. It seemed so real… the matches, the hits, the drama.

Every time Hulk Hogan would be at the point of near-exhaustion, and then rally to victory from the chants and cheers of the crowd, I had believed it all.

When I actually started paying attention it became obvious that professional wrestling was a farce staged purely for entertainment purposes.

Funny thing– even though I knew it was fake, I continued to watch wrestling for several more years, until I was probably 10 or 11. It was, after all, still entertaining.

That’s how I felt last night watching the Presidential debate.

It was pure entertainment… a guilty pleasure that ranks somewhere between Wrestlemania and stuffed-crust pizza.

I know a lot of people feel the same way, that debates are meaningless vacuums of intelligent discourse which are simultaneously entertaining and awkward to watch, like witnessing two intoxicated lovers engage in a very public, dramatic breakup.

Sadly, this is what passes as a critical component of the political process in the most advanced economy in the world.

I recognize that people feel they have an important choice to make, whether to give the system a deserved enema or maintain the status quo… and that perhaps they’ll glean some insight into the candidates’ agendas by watching the debates.

In reality you’ll find more substance in a fourteen year old’s Twitter feed.

There’s no talk of actual plans, metrics, priorities, or details… just a bunch of zingers and platitudes.

That’s not how things are supposed to work in the real world.

I run several companies– agriculture, manufacturing, publishing, and now banking, with a total of roughly 350 employees.

Our management teams lay out concrete plans to the stakeholders articulating the specific goals and vision of each business, how we achieve those objectives, and what specific metrics can measure our performance.

Plus regular updates report on our progress, any deviations to the plan, and whether or not we are on-time and on-budget.

This isn’t rocket science or some radically innovative concept. It’s what any competent, ethical business manager does.

But that’s not how government works, and it’s not how the political system works.

Whenever I visit the US, people frequently ask me who I’m voting for.

It came up over dinner on Saturday night in Connecticut with Peter Schiff and his wife Lauren.

I typically joke that Trump is the only qualified candidate because he’s declared bankruptcy so many times… and with nearly $20 trillion in government debt, you want to have someone in office who knows which paperwork to file.

But my honest answer is that I don’t vote.

For starters, it doesn’t actually matter who’s in office.

The government spends nearly the entirety of the tax revenue it collects just to pay interest on the debt and cover mandatory entitlement programs like Social Security and Medicare.

They could literally cut everything we think of as government, from the military to the Internal Revenue Service, and it would barely make an impact.

Plus, even the government’s own optimistic projections show that the debt will continue to grow at a much faster pace than the economy itself.

So any choice ultimately leads to the same set of extreme economic consequences.

But it’s more than that.

As I explained to my friends, voting only validates a rotten system that has not only abandoned its primary stakeholders, but is now rigged against them.

Besides, what are we really voting for anyhow?

People typically cast a ballot for the person they believe will bring the most prosperity.

But this is ludicrous when you think about it. Can we really expect that some politician thousands of miles away will magically increase our incomes?

No. WE are the ones who have the most influence to grow our own prosperity.

From learning new skills to making better investments, starting businesses, cutting taxes… we have nearly unlimited ways to become more prosperous and provide a better life for our families.

So the truth is that there’s only one viable candidate to make your dreams and ambitions a reality. That’s you.

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‘Mastermind’ Of Bridge-Gate Testifies Chris Christie Knew Of Plot In “Real-Time”

Despite New Jersey Governor Chris Christie's previous denial that he had real-time knowledge of the politically-motivated traffic jams on the GWB, Bloomberg reports that, David Wildstein testified that Christie was told of events as they took place.

While Christie hasn't been charged and says he wasn't aware of the traffic issue until weeks after they happened, Bloomberg reports that on today's 3rd day of testimony:

David Wildstein, the self-professed mastermind of the George Washington Bridge scandal, testified that he and his boss bragged to New Jersey Governor Chris Christie about politically motivated traffic jams near the span as they took place.

 

 

Wildstein, a former Christie appointee at the Port Authority of New York & New Jersey, which operates the bridge, said at a trial that he and his former boss, Bill Baroni, spoke with the governor at the World Trade Center during a September 11 memorial service in 2013.

 

David Wildstein is testifying against Christie's former deputy chief of staff and the governor's top appointee to the authority that operates the bridge.

 

Wildstein told jurors he texted deputy chief of staff Bridget Kelly with reports of heavy traffic on the second day of the jams. He says Kelly texted back, "Is it wrong that I'm smiling?" Wildstein testified they ignored Fort Lee Mayor Mark Sokolich's pleas for help.

 

The exchange came on the third morning of gridlock intended to punish Mark Sokolich, the mayor of Fort Lee, New Jersey, for failing to endorse Christie’s re-election.

Chris Christie will hold a press conference shortly (1130) to discuss a new drug recovery program but we suspect the questions will be a little different that he hoped…

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Wells Fargo May Claw Back Millions From Carrie Toldstedt, John Stumpf As Soon As Today

If banking villain du jour Carrie Toldstedt thought she had managed to sneak away quietly into the night, with her recently topped off bank accounts intact before Wells Fargo’s biggest consumer fraud scandal in years became front page news, she may want to think again… and the same goes for CEO John Stumpf, who while not quitting just yet, may find himself departing quite soon. According to the WSJ, Wells Fargo’s board is actively considering whether to claw back pay from former retail-banking head Carrie Tolstedt as well as from Chief Executive John Stumpf.

Following the recent kangaroo court in the Senate, in which Elizabeth Warren Stumpf almost accused Stumpf of being a criminal and urged him to quit, the Wells board could make a decision as soon as Tuesday on whether to clawback compensation from the two disgraced executives. The board wants to take action before Mr. Stumpf returns to Capitol Hill; he is scheduled to testify Thursday before the House Financial Services Committee.

As we reported at the time, clawbacks, or rather their absence, was a key focus of the Senate Banking Committee hearing last week, in which Stumpf and the bank were roundly criticized for firing 5,300 employees over five years yet taking no action against top executives.

But while Stumpf took the heat, it was the recently departed Carrie Tolstedt, head of the infamous “sandbagging” group within Wells, who became a point of focus at the Senate hearing because she oversaw the bank’s retail banking operations during the time in which regulators allege “widespread illegal” practices took place. She stepped down from her role in July and is set to retire at the end of the year. Her total compensation, including accumulated stock and options earned over her 27 years at the bank, could run about $90 million, according to a letter Wells Fargo sent senators last week.

It remains to be seen how much of Toldstedt’s pay is up for clawback. As for Stumpf, his total pay package for his 35 years at the bank adds up to about $160 million, according to an independent analysis by human resources consultancy Overture Group LLC. That includes stock awards, stock options and performance shares, among other aspects of his pay package, based on the bank’s Sept. 26 share price of $45, according to Mark Reilly, a managing director of Overture.

Ultimately, the fate of Stumpf’s retroactive pay will be in the hands of Lloyd Dean, president and chief executive of Dignity Health, a San Francisco-based not-for-profit health-care system, who is chair of Wells’ human-resources committee.

Sadly for the two embattled executives, repaying back pay may be just the start of their troubles: overnight, Bloomberg reported that the Department of Labor agreed to conduct a review of Wells Fargo & Co. requested by lawmakers including Elizabeth Warren, who said the bank may have put undue pressure on employees to meet sales quotas. Lawmakers had asked the agency in a letter last week to investigate after the San Francisco-based lender was caught creating legions of sham accounts for customers over half a decade. They said they want to know whether the company violated wage and overtime rules while pushing branch workers to meet aggressive targets.

“Given the serious nature of the allegations, the recent actions of our federal partners, and recent media reports, I have directed enforcement agencies within the department to conduct a top-to-bottom review,” Labor Secretary Thomas Perez responded Monday in a letter obtained by Bloomberg. The agency established a working group to carry it out, he said.

Meanwhile, the lawsuits against Wells keep piling on. After the bank was sued last week by disgruntled, laid off former employees, yesterday a class action complaint lawsuit was filed on behalf of shareholders from Feb. 26, 2014, to Sept. 15, 2016, in federal court in northern California. The lawsuit includes allegation that when CEO announced in July that head of community banking unit was retiring, he “concealed the fact that the company had made substantial findings of the unlawful activity and actual fraud in its Community Banking segment as part of its investigation, which not only exposed millions of customers to unlawful fees and potential identity theft, but put the company in the crosshairs of federal investigations.”

And somehow throughout all of this, Wells Fargo’s largest shareholder, Warren Buffett has not said a word, something he has vowed won’t change until after the election. One wonders why he is so afraid to wage into what has become the biggest banking scandal of the year.

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Oil Crashes After Saudi-Iran “No Deal” Headlines

It appears the entire headline-hockey debacle was a farce: SAUDI ARABIA, IRAN MADE NO PROPOSALS DURING MEETING: ZANGANEH

 

 

Just minutes before, we got this…

  • *U.A.E. `OPTIMISTIC’ ABOUT REACHING OIL DEAL, MAZROUEI SAYS
  • *UAE: GREAT IF WE CAN GET FREEZE; MKT WILL STILL RECOVER IF NOT
  • *UAE: NOT DISCUSSING ANY ALLOWANCES FOR MEMBERS TO RAISE OUTPUT

Which Iranian Oil Minister Zanganeh rebuffed:

  • *SAUDI ARABIA, IRAN MADE NO PROPOSALS DURING MEETING: ZANGANEH

So no deal… no discussion… no negotiation.

In fact it appears the entire debacle was played out for the media (and short-squeeze).

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Is a “$46 TRILLION” Lehman Brothers Event Just Around the Corner?

The financial world is abuzz with talk of the first Presidential debate.

Meanwhile, one of the largest derivatives books in the world is imploding.

Deutsche Bank (DB) is the 11th largest bank in the world. And it has over $61 TRILLION (with a “T”) in derivatives on its books.

AND IT HAS LOST NEARLY A QUARTER OF ITS VALUE IN THE LAST THREE WEEKS.

DB is not alone here. Across the board, we’re getting signs of an impending banking crisis in Eurpoe.

Credit Suisse (CS) is trading BELOW its 2012 banking crisis lows.

So is Barclays (BCS)

The EU banking system is $46 TRILLION in size. This is THREE TIMES larger than the US banking system, which nearly imploded the markets in 2008.

And the EU bankinf system as a whole is leveraged at 26 to 1. Lehman Brothers was leveraged only slightly higher than this at 30 to 1.

Indeed, we believe the global markets are on the verge of another Crisis, triggered by a crisis of faith in Central Banks.

2008 was Round 1 triggered by Wall Street banks. This next round, Round 2, will be even worse as faith in Central Banks collapses.

If you've yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis "Round Two" Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.

We made 1,000 copies available for FREE the general public.

As we write this, there are less than 80 left.

To pick up yours, swing by….

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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