Everything You Need To Know About Gold In 50 Stunning Slides

Submitted by Pater Tenebrarum via Acting-Man.com,

A Companion Update to this Year’s “In Gold We Trust” Report

Our good friends Ronnie Stoeferle and Mark Valek of Incrementum AG have just published a new chart book, which recaps and updates charts originally shown in this year’s 10th anniversary edition of the “In Gold We Trust” report and provides an overview of recent developments relevant to the gold market. The chart book can be downloaded in PDF form via the link at the end of this post.

 

Queen Elizabeth skeptically eyes what little is left of England's once sizable gold hoard

Queen Elizabeth skeptically eyes what little is left of England’s once sizable gold hoard. Her mien seems to indicate regret. Well-known socialist financial guru Gordon Brown ordered the sale of half of the UK’s gold in 1999, at prices that had just reached 20 year lows. Not surprisingly, these prices have never been seen again. While he created a once-in-a-lifetime buying opportunity for the rest of the world, the Queen possibly suspects that regrets over this ill-conceived disposal could one day easily become a great deal more intense.

 

We show one of the updated charts below, namely the proprietary Incrementum inflation signal. The calculation of the signal is based exclusively on market-derived inputs. It tends to be far more sensitive to changes in inflation/ deflation pressures than many other gauges, which results in more timely responses to changes in these pressures. At present it clearly indicates that the environment for precious metals remains favorable.

 

1-incrementum-inflation-signal

The Incrementum Inflation Signal: current conditions are favorable for precious metals and other inflation-sensitive assets – click to enlarge.

 

The Big Bad Bear

Many well-known mainstream financial media seemed uncharacteristically silent about the 11 year long (and quite relentless) gold bull market from 1999-2011. Occasionally a disparaging remark was dropped, or a few sentences ascribed to Warren Buffett were quoted (something about Martians scratching their heads in wonderment when looking at gold hoards gathering dust in vaults on Earth). Compared to the rah-rah-rah that usually tends to accompany rising stock prices, gold’s rally almost had the air of a funeral.

If memory serves, most of Wall Street officially discovered the bull market around 2009 – 2010, not exactly an example of the most rapid or timely embrace of a strong uptrend either (there were a few notable exceptions). Quite a few WS houses only became truly enthusiastic about gold a few months before it peaked and remained that way for almost an entire year thereafter, a time period during which gold basically went nowhere – until it broke down, that is.

Over the past few years a lot of ink has been spilled on the bear market that started in late 2011 though. Around mid 2013, numerous authors writing for the above mentioned publications were suddenly kissed by the muse and discovered they had a great deal to say about the bear market in gold. Even endearing new terms for gold entered the lexicon (“pet rock”). Falling gold prices seemed to be a very effective antidote for writer’s bloc.

We have penned several missives on gold’s role as the J.R. Ewing of the investment world – it is essentially the asset they love to hate. There are of course very good reasons for this, many of which we have discussed in depth in “Gold and the Grave Dancers”.

That is not the point of the above though. We mainly want to remind readers of the unusual efforts expended between mid 2013 and late 2015 on producing a veritable flood of screeds proclaiming gold’s imminent demise. This backdrop serves as the mise-en-scène for the following table from the chart book, which shows the annual performance of gold since 2001 in terms of nine major currencies:

 

2-gold-performance-table

Gold’s annual performance since 2001 in terms of nine major currencies. 2013 was indeed quite a bad year for gold; and to be sure, 2015 wasn’t much to write home about either. Other than that, gold’s average annual gain of 10.85% (in terms of all currencies combined) or 11.94% in USD terms, means it has vastly outperformed every other major asset class since 2001 – click to enlarge.

 

As you can see, there is a time for everything. Even including the massive correction of 2011 – 2015 (in USD; 2011 – 2013 in EUR), gold is beating the annualized returns of other major financial asset classes by a huge margin over the past 16 years.

 

Points of Departure

Naturally, there is no guarantee whatsoever that gold will resume its outperformance in coming years, but we believe the secular bull market still has some life left. In fact, long term bull markets in gold and commodities traditionally tend to deliver their greatest gains in the final rally phase (this is so because these assets are driven by fear rather than greed – and fear always produces price spikes).

The next chart illustrates the relative price performance of gold, the SPX and the 30 year t-bond since mid 1999. The yields of the latter two are not included in this comparison, i.e., on a total return basis they have done better than is shown here – but a huge performance gap would remain even so:

 

3-performance-comparison-chart

Price performance of gold, stocks and bonds since mid 1999. We’re not sure what the Martians would say to this, except maybe “we should have bought some” – click to enlarge.

 

Whether gold, stocks or bonds are the better investment obviously depends on one’s starting point, but it is worth noting that the one we have chosen above – the 19.5 year low in gold in 1999 – is never mentioned as a viable point of departure in the mainstream financial media. And yet, they will glibly parrot truisms like “buy low, sell high”.

A great many authors like to focus on gold’s manic spike high on January 21 1980, which obviously puts the metal’s subsequent performance in the worst possible light. This makes very little sense though, considering that the final 41% gain of that particular rally was produced in the span of just five trading days.

Obviously it was a very unique situation – indeed, it was a speculative blow-off driven by fears over the Soviet Union’s brazen invasion of Afghanistan on December 24 1979. On the eve of the invasion gold traded at $473 – a time at which its advance had already been egged on considerably by the Iranian revolution. It peaked exactly one month later at $850. A mere five trading days before the peak it traded at $603.

 

Conclusion

The Incrementum chart book attempts to help to answer the question whether gold remains an attractive investment. After all, it is no longer the bargain it was back in 1999-2001 – but that certainly doesn’t mean its secular advance is necessarily done. We think there is every reason to believe its best days are yet to come.

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50 Slides for the Gold Bulls Incrementum Chartbook

 

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Download link: Incrementum Chart Book – 50 Slides for Gold Bulls (pdf)

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This Is The Rumor Causing The Spike In Deutsche Bank Shares

In the past few hours, DB stock has staged a dramatic rebound, surging from its overnight -9% lows, to green on the day. What is causing it: after all, aside from a trivial “Dick Fuld-esque” letter by John Cryan to his employees blaming speculators for the plunge, there has been no actual news.

The catalyst for the spike is again a rumor.  As Bloomberg writes, “there has been trader unsubstantiated speculation – launched on Twitter – that the bank may reach a lower RMBS settlement with the U.S. DoJ than feared.”

unverified handles on Twitter speculate the DoJ fine may be $5.4b, vs reports earlier this month the DoJ had sought $14b. Unverified handles including @fiatcurrency, @Fxmacro Tweet or retweet the speculation.”

The rumor got extra significance after some traders repeated and “justified it” in the process, to wit: “Deutsche Bank stock is being helped by speculation the DoJ settlement could be lower than feared,” Sylvain Loganadin, market analyst at FXCM, told Bloomberg by phone. “People don’t want to stay short on Deutsche Bank going into the weekend in case there’s a statement”: Loganadin

The catalyst for the rumor is a phone conversation held earlier today between the US president and German chancellor although as Bloomberg reported just before 6am, President Barack Obama and German Chancellor Angela Merkel didn’t discuss U.S. Justice Department’s case against Deutsche Bank AG during phone call, German government spokeswoman Ulrike Demmer tells reporters.

Adding some color to potential regulatory intervention, Bloomberg also noted that when asked about concerns over Deutsche Bank, chairman of the White House Council of Economic Advisers Jason Furman says Obama administration is monitoring banking system daily. 

Furman, speaking at a Bloomberg breakfast in Washington, says Europe made less progress than U.S. in protecting banks. “They’ve made less progress in terms of increasing capital for their financial institutions, less progress in putting in place some of the mechanisms we have for resolving them,” Furman says about Europe.

However, he adds that “there are a lot of mechanisms both within Europe and within the U.S.” to protect the financial system, Furman says

“We do feel good about the strength and resilience of both the U.S. financial system, our overall economy and the tools we have to deal with our financial system,” Furman says in separate interview on Bloomberg TV.

* * *

Naturally, Deutsche Bank has refused to comment on speculation around the level of the DoJ fine.

Which means that should the DOJ make no announcement on Sunday, any buying spree today in DB may promptly turn into another selloff. Making matters worse, with German trading closed for holiday on Monday, only the far more illiquid US tracking stock will be open, which may accentuate any potential selling.

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Chicago Fed Bounces But Employment Slips

"Economic growth in the US appears to have picked up a little at the end of the third quarter," reports MNI as September's Chicago Fed ticked up to 54.2 (better than the 52.0 expectations). Most subindices rose but notably employment fell. While excuses grow around the nation for disappointing data, 79% of Chicago panellists said the run-up to November Presidential Elections is having a negligible impact on business.

 

 

As MNI reports, on a trend basis, the MNI Chicago Report paints a slightly better picture than earlier in the year with the Barometer averaging 53.8 in Q3, up from 52.2 in Q2 and the highest quarterly level since Q4 2014.

The latest increase was driven by a sharp gain in Production, which rose 7.3 points to 59.8, the highest since January 2016. The relative weakness in output earlier in the year as well as a marginal advance in New Orders between August and September tempered somewhat the latest pickup in Production.

 

New Orders and Order Backlogs, which led the Barometer's decline last month, were little changed in September, with the latter failing to bounce back above the 50 breakeven level. Employment was the only Barometer component that fell on the month, having rallied to a 16-month high in August.

 

Meanwhile, Supplier Deliveries lengthened to the highest level since May 2016. Some companies reported difficulties in getting MRO supplies, with times to source at the longest since September 2015. Some suppliers and manufacturers said they may have been notified up to a month ago that there were issues with Hanjin shipping. "We're are watching for the effects of the Hanjin shipping on moving goods here from China," said one panelist.

 

An equal number of firms reported increasing inventories as decreasing them, with the Inventories indicator rising just above 50 in September, having edged into contraction territory in August.

 

Prices Paid rose slightly, indicating early signs of pipeline inflationary pressures, after four consecutive monthly falls left the indicator running at a five-month low.

 

In response to September's special question, 79% of Chicago panellists said the run-up to November Presidential Elections is having a negligible impact on business.

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King County Sheriff Continues to Offer Distorted View of Seattle Sex Trafficking

A few weeks ago, Reason published my investigative piece “The Truth About the Biggest U.S. Sex-Trafficking Story of the Year,” which documented how law enforcement in the Seattle area and the media misrepresented the facts in a case that was a lot more about consensual prostitution than it was about sensationalistic, international sex-slavery rings. I sought to show that the highly charged and mostly inaccurate ways that cops, prosecutors, and reporters portrayed the events and the participants (both buyers and sellers of sexual services) exemplifies the ways in which consensual acts among adults are being recast as nefarious and non-consensual acts of villainy, and websites that actually make the sex trade safer—such as Seattle escorting forum The Review Board—scapegoated by law enforcmenet as deviant new tools of exploitation.

Now, one of the major law-enforcement figures in the case has spoken out on a poplar Seattle radio show, and his comments actually underscore my points. The sheriff of King County, Washington, John Urquhart, said my article was not unfair and even “partially true.” What he objected to was the supposedly naive and “unicorn-ish” view it took toward prostitution clients; the idea that it was law-enforcement, rather than the press, that sensationalized the story; the implication that finding prostitution customers online is safer than out on the streets; and the suggestion that King County could have acted differently considering existing laws.

“Clearly, Reason is a libertarian type of magazine,” and “they have a bent toward the legalization of prostitution,” said Urquhart in an interview last week with Seattle’s Dori Monson Show. Whether prostitution should be legal is “certainly debatable,” he added, but it’s his department’s job to enforce laws as they exist and if Washingtonians don’t like it they “should change state laws.”

“That’s really what we’re talking about,” said Urquhart. “You’re asking me not to enforce state law.”

Nobody is asking that. But there is a huge amount of prioritization that goes into police work, and solving crimes where there are actual victims and public-safety concerns should take precedence. Which probably means not concocting elaborate, expensive, and years-long sting operations in order to entrap adults engaging in consensual sexual exchange and then misrepresent this as some sort of major blow against a sinister syndicate of international sex traffickers. Probably.

It’s worth taking a look at the specific claims, excuses, and rebuttals Urquhart offered to Dori Monson during their conversation on KIRO Radio, including his shocking assertion that The Review Board (TRB) was linked to rapes, robberies, and murder (it wasn’t). Once again, the King County Sheriff’s distortions are easy to disprove. And once again, his solution to supposed violence in the Seattle sex trade is to drive it further underground.

Blame the Press

“Is there anything to support that it was a major sex trafficking operation?” Monson asked the sheriff outright at one point. “I think the press certainly took that view of it,” replied Urquhart, but “whether we or the prosecutor’s office promoted that view is up for debate.”

Here is the headline of a press release from the King County Sheriff’s Office (KCSO) about the case: “Historic Raid Dismantles National Sex Trafficking Website, Shuts Down Brothels, and Charges Multiple Suspects with Unprecedented Felony Charges.”

Here’s what Prosecutor Dan Satterberg said at a January press conference announcing the bust: “The systematic importation of vulnerable young women for sexual abuse, exploitation, and criminal profiteering has been going on for years and it came to a stop this week.” Satterberg also described the women as “true victims of human trafficking.”

Then there was the whole January 7th press conference, in which the county promised that the FBI would support an ongoing “large scale human trafficking investigation” to be conducted by KCSO and Bellevue Police. Urquhart, a former vice detective, spoke during the conference about how the internet had changed prostitution and mentioned Backpage.com, a user-generated advertising site friendly to sex workers and reviled by politicians and law enforcement. Urquhart told reporters: “We all know about Backpage.com and how bad it is. [The Review Board] was like Backpage.com on steroids. It was much, much bigger.”

It wasn’t. Backpage is the second largest classified-ad listing service worldwide, used in hundreds of cities and at least 10 countries, with Dutch headquarters and ads across a range of categories. TRB was an advertising forum for sexual services only, around Seattle and surrounding areas only. Its owner was a local man who knew many of the “escorts” and “hobbyists” who used TRB personally, and ran it on server space provided by a former sex worker.

The Bondage of U.S. Laws

Monson recently corresponded with a Seattle sex worker who had used TRB before its shutdown. She said “there are lot of local women who just view themselves as independent contractors, they choose that line of work,” and choose to advertise on TRB, Monson reported.

The sheriff agreed that TRB mostly provided a way for consenting sex workers “to hook up” with customers. But there was also “a subculture of TRB” involving Korean escorts who “came into this country illegally, or at the very least they stayed illegally,” he said. And while these women may not have faced physical restraints or abuse, they were coerced “mentally, economically, and psychologically to continue in this work.”

“Well, I’m coerced economically,” replied Monson. “You and I are both coerced economically. That’s why we’re both at work today.” Urquhart responded that Monson was “absolutely correct,” but the difference is that “our jobs we’re stuck in are not illegal.”

It’s not the only time during the interview that Urquhart inadvertently blames prostitution’s criminalization for the problems police set out to solve here.

“I think from the standpoint of ‘bondage,’ we have this view of some Simon Legree that’s beating them up all the time, that they’re chained to the wall,” Urquhart told Monson. “That clearly wasn’t occurring” in the K-Girl case.

But these women… they spoke little if any English, they knew nobody in this country, had nobody to talk to except their other sex workers. They faced the fear of deportation because they overstayed their visas, they were threatened with being turned out if they didn’t cooperate. If they weren’t good sex workers, if they didn’t please the men… then they’d be turned out and they’d be in this foreign country, facing deportation, facing arrest. So that certainly is a type of bondage.

Just to reiterate: the sheriff admits that the women came to the U.S. and overstayed visas deliberately, were neither physically restrained nor abused, and had close ties to a community of other Asian sex workers. They also charged decent rates ($300 per hour was standard) and kept most of the money they earned. This is a form of bondage, according to Urquhart, because if they didn’t want to sell sex anymore, their alleged captors would let them go, and as a result, they might be arrested or deported by agents of the U.S. government.

The Case for Street Corners?

Monson told Sheriff Urquhart that, to him, The Review Board sounded like “Yelp for sex work,” with both providers and their clients benefiting from the easy flow of two-way info it yielded. “That’s exactly right,” Urquhart said. And that’s why he objected—like with Yelp, people could sign-up and post without revealing their real identities or going through serious vetting. “There was no mechanism to keep [serial killers] Gary Ridgeway or Ted Bundy from signing up or being a customer.”

He’s partly right: Just as there’s no surefire way to stop bad guys from joining Facebook, using Tindr, or entering nightclubs, TRB couldn’t definitively prevent potential serial killers from signing up.

Nor did it claim to. TRB was an advertising and messageboard site, not a service that purported to pre-screen clients. For screening purposes, sex workers and agencies had their own protocols, which might require first-time clients to produce proof of identity, furnish references in the form of sex workers they had seen before, or be referred by an existing client.

The Korean escort-agencies that the sheriff’s office busted were notorious for having especially stringent screening policies.

Still, TRB did help women with safety in its own way. It and other online-ad options allow sex workers to find and screen clients on their own, in their own time, without having to make the sort of split-second decisions required in street solicitation settings (or relying on a pimp). This, in turn, lets them take other precautions, like seeing clients in established (and secure) locations, avoiding riding in cars with strangers, and keeping others apprised of their whereabouts.

Urquhart agreed with Monson’s statement that “there isn’t a bar in Seattle … that has a firewall that protects people” from serial killers.

“But by the same token the bar or the street corner isn’t being portrayed as some way of looking at clients, of vetting clients, of vetting the johns so the girls aren’t going to get hurt,” said Urquhart. The problem is the “false sense of security that was promoted by TRB.”

Urquhart also slammed TRB for offering free advertising to sex workers. “They didn’t have to spend money 40 bucks to advertise on Backpage,” he complained. “The workers could go to TRB and advertise for free.”

No False Hope

Urquhart told KIRO Radio that the sheriff’s office “had numerous reports of rapes, and certainly several robberies that were occurring over in Bellevue, and one homicide of one of these Korean workers that occurred, where her body was left in a closet and set on fire. So this is not the idyllic view that the Reason article wants us to believe.”

Urquhart leaves out a lot of key facts here, the most important being that none of these cases had anything to do with TRB, Korean escort agencies, or anyone involved in this current case.

The 2015 murder of a “Korean worker” that Urquhart mentions actually involved a Thai woman, Kittaporn Saosawatsri. She was thought to be in prostitution, and her killer—who also robbed her and set fire to her apartment—is believed to have first made contact by posing as a client. But this contact originated via a Backpage ad and the motive was allegedly burglary. The man charged, Song Wang, was in serious debt and implicated in other home robberies.

The other recent incidents of sex workers being targeted for robbery involves a man who gained access to their apartments by posing as an FBI Agent. He and a female accomplice “targeted women they believed would either not report or would not be believed if they did” because of their status as sex workers, according to a case summary prepared by Bellevue Detective Ellen Inman. “Roberts accomplished each robbery with a gun and by impersonating a law enforcement officer, handcuffing the victims and displaying a badge around his neck.”

This past winter saw a rash of rapes targeting Seattle sex workers—some involving physical violence and threats at knife-point—but all of the victims were picked up streetwalking on Aurora Avenue. In 2013, John Hauff, Jr., was convicted of raping and torturing a sex worker in a self-made torture chamber in his basement. He also picked her up on Aurora Avenue.

Whether or not online sex ads provide people with a “false sense of security,” as Urquhart fretted, it’s mind-boggling how anyone could say street-based sex work is a superior alternative. In Seattle, it has a shockingly high body count that dates back decades. Pouring through old newspaper articles, one finds story after story of women raped, abused, and murdered by men who solicited them for sex off Seattle’s streets.

Gary Ridgeway, whom Urquhart mentioned a few breaths before extolling the virtues of “street corner” sex work, is better known as the “Green River Killer” and has the distinction ofhaving the most confirmed victims by any serial killer in history. Ridgeway was believed to have murdered 49 women in two years between 1982-1984, “most” of whom “had been arrested for prostitution and frequented the Sea-Tac strip,” according to a Seattle Times story from 1993.

Ridgeway eventually pleaded guilty to 48 murders in King County, and is believed to be responsible for upwards of 70. His victims were overwhelmingly sex workers and teen runaways he picked up off the streets.

These are the streets that King County Sheriff Urquhart suggested would preferable for sex workers than finding clients on TRB, vetting them on their own or through paid bookers, and meeting with a group of regular clients who vouched for one another, went through screening hoops, showered and used mouthwash at the start of each session, and have never been known to rape, rob, or murder anyone.

At least there’s no “false sense of security.”

Pretty Woman Paradox

“This was not Pretty Woman,” Sheriff Urquhart stressed to Monson, referencing the 1990 blockbuster in which Julia Roberts plays the proverbial hooker-with-a-heart-of-gold and Richard Gere a wealthy but boorish businessman who falls for her. “That’s not how this type of prostitution was occurring.”

Later in the interview, Urquhart reiterated: “We were not going after the Julia Roberts, the ‘Pretty Women.'”

Perhaps it’s been awhile since Urquhart actually saw the movie, but Roberts’ character, Vivian, is hardly the symbol he wants her to be. A streetwalker who started as a teenager and has learned the hard way not to trust pimps, she can barely make rent on a crappy apartment she shares with a drug addict and her only hope for a better life is being saved by a wealthy client. When this dude-ex-machina comes along in the form of Gere, Vivian is able to leave prostitution and spend her life dependent on his money.

In contrast, the Korean sex workers, or “K-Girls,” described in King County court documents worked independently out of upscale apartments, seeing heavily vetted clients solicited over the Internet rather than through a car window. Their exact situations varied, of course, but many spoke of deliberately coming from Korea to the U.S. to peddle sex for a finite time and save up money for some specified goal. They didn’t need Richard Gere to rescue them, because they were making better futures for themselves.

“Proof”

By the end of the KIRO interview, Sheriff Urquhart was backpedaling on earlier statements implying that Seattle’s K-Girls had agency. “We were going after the Korean sex workers that we believed, and we believe to this day, that were coerced, that were forced, that had no choice but to work in this particular business under these particular circumstances,” he said.

“You believe they had no choice, or you have proof they had no choice?” asked Monson.

“We—” Urquhart hesitated for a moment. “I’ll call it proof, yes we had proof. We interviewed these women, we understand their situation. We’ve talked to them. We did everything we could to get them help.”

He’ll call it proof. With little clue as to these women’s identities, no transcripts or recordings of these alleged conversations, and not so much as a whiff of their statements in charging documents against their alleged assailants, Urquhart’s word here is all we have to go on.

And despite the 130+ subpoenas served in this case, the physical surveillance of suspects, the surveillance footage from their apartment buildings, the website and email records seized, the myriad “dates” undercover detectives went on with K-Girls, the client happy-hours clandestinely recorded, and the thousands of pages of TRB posts and private communications cops have in their files…. the best the Sheriff can offer to back up claims of force and coercion is these undocumented, un-utilized conversations. Chats that supposedly yielded “proof” of women being forced into prostitution and yet played no further role in the case.

When I spoke to King County Senior Deputy Prosecutor Valiant Richey in June, he made it sound as if police had little interaction with K-Girls they encountered at the dozen raided “brothels.” None were taken to police headquarters for further questioning, even though Urquhart claims the women spoke very little English (I guess Korean translators were assigned to all of the simultaneous apartment-raid teams?). Richey said the women were offered the chance to speak with social service agents and some did, but he has no idea what came of those conversations.

“Many of them I think just wanted to leave,” he said. And so the county let them leave.

I’m glad King County didn’t arrest these women for prostitution, or hold them as material witnesses in order to compel their cooperation. But if we really were looking at a huge ring of organized sex traffickers and these women held the key to taking it down… it seems strange that officers didn’t try a little harder to get some sort of usable info or statements from them. If Urquhart and Richey are both to be believed, then King County spent months prepping for the raids where Korean women were “rescued,” obtained “proof” through brief conversations that these women had been trafficked and forced into prostitution as part of a sophisticated criminal enterprise, and then just said see ya and never checked back in.

Guilt by Tautology

The major fallacy of the Reason article, said Urquhart, is that the men charged with promoting prostitution “were not just the customers … We did not go after the customers of the women. We went after the men that were promoting the prostitution.”

But the question isn’t whether these men’s involvement in prostitution went beyond strictly soliciting, paying for, and having sex (i.e., being customers), which almost nobody (and certainly not my initial article) disputes. Yes, they wrote reviews online, and some met up over beers to swap sex stories. Yes, some vouched for each other as new clients, or recommended specific sex workers or agencies to one another. Yes, in a purely literal way this can be considered “promoting” prostitution. (Legally, it’s more of a gray area.) The main point of contention with the charges, however, is whether “promoting prostitution” in this way is deserving of a felony conviction with a mandatory minimum fine of $3,000, not to mention the total destruction of these men’s reputations and livelihoods. And the big question is whether this sort of “promoting prostitution” in worthy of large undercover police stings using resources allocated for fighting sexual-exploitation and human-trafficking.

Even on a more direct level, Urquhart misrepresented case outcomes to the Dori Monson Show. “These are all men that hired the best private lawyers in Puget Sound,” said Urquhart, and yet they pleaded guilty to the charges accused of them. “If they weren’t guilty of that crime, you would certainly bet that at least one of them would have gone to trial,” he opined. “And they all plead guilty.”

Actually, they didn’t. At least two defendants are taking their cases to trial, and two more might, according to the most recent documents filed with the King County Superior Court. The trials are scheduled for January 2017.

Another defendant tried to withdraw his initial guilty plea and was denied. Another defendant would only accept a plea deal using an Alford Plea, which essentially agrees to the state’s conditions without admitting guilt in any way.

It’s also important to realize that all but one defendant initially entered not guilty pleas and were planning on fighting the charges. But after one lawyer pressed the county for specifics on how the promoting prostitution statute applied to his client, all defendants were threatened with additional charges and sex-offender status if they didn’t accept a plea deal. Those who fell in line were able to avoid much or any time in prison, will not have to register as sex offenders, and will not have to endure the continued publicity of a trial. For those opting to fight the charges, the state withdrew the plea offer and tacked on extra counts of promoting prostitution as well as a “sexual motivation” enhancement charge.

At the end of his interview with KIRO Radio, Urquhart said he didn’t “think anybody’s rights were violated” by King County’s investigation and still believes it was a good call to pursue the case as his office did. “When women are being prostituted out, when they’re held here against their will—either physically or mentally—then we need to help them. We as a society need to help them and that’s what we did.”

Who exactly was helped is unclear, however. Not the women who relied on TRB to find customers from the comfort of their homes. Not the “rescued” K-Girls whose temporary living-quarters were seized and client-bases destroyed before police simply sent them on their merry way to go forth and prostitute elsewhere. And certainly not the men who will have felony histories for daring to discuss prostitution in private message forums. King County did get to seize $9,000 from one Korean sex worker, along with a guaranteed minimum of $3,000 from each man who pleads guilty to promoting prostitution. It should far from cover the costs of the investigation and prosecution, but factor in all the good publicity King County got for their efforts and it’s clear who the only winners are.

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Deutsche Bank Yield Curve Inverts As Counterparty Risk Hedging Spikes Despite DoJ Rumors

As the mainstream media attempts to mollify the ignorant masses with rumors of reduced DoJ fines for DB (as if that the problem now), professionals are buying counterparty risk protection at the fastest pace in history.

 

If you are a leveraged fund with client relationships with Deutsche Bank, you have a number of options including: 1) Reduce excess cash (already saw yesterday as hedge funds begin run), 2) Demand tri-party arrangements (i.e. force DB to allow you not to face them as a counterparty – which we have also already seen), or 3) Reduce risk (unwind positions or hedge potential for loss from counterparty risk)

And now that final hedging of Counterparty Risk is occurring at a rapid pace.

 

While the stock price bounces on completely unconformed reports of DOJ reducing its DB fines (which is irrevelant now that DB has become a liquidity issue), Professionals are ploughing into protection, pulling cash, and demanding tri-party.

This has inverted the DB yield curve – a very ominous sign.

 

It took a global coordinated money flood to save the world systemically in Feb… what happens next?

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Hunter S. Thomson’s Prescient 1972 Warning

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

While on the campaign trail in 1972, Hunter S. Thomson issued a dire warning that is more true today than it ever has been.

He warned us about what would happen to the country if we continued along the destructive path he noticed nearly 45 years ago. He observed that if Americans continued to accept “lesser of two evilism” the only thing we’d end up with would be increased evil.

He was right.

Here’s the quote:

That’s the real issue this time,” he said. “Beating Nixon.  It’s hard to even guess how much damage those bastards will do if they get in for another four years.”

 

The argument was familiar, I had even made it myself, here and there, but I was beginning to sense something very depressing about it.  How many more of these goddamn elections are we going to have to write off as lame, but “regrettably necessary” holding actions?  And how many more of these stinking double-downer sideshows will we have to go through before we can get ourselves straight enough to put together some kind of national election that will give me and the at least 20 million people I tend to agree with a chance to vote for something, instead of always being faced with that old familiar choice between the lesser of two evils?

 

Now with another one of these big bogus showdowns looming down on us, I can already pick up the stench of another bummer.  I understand, along with a lot of other people, that the big thing this year is Beating Nixon.  But that was also the big thing, as I recall, twelve years ago in 1960 – and as far as I can tell, we’ve gone from bad to worse to rotten since then, and the outlook is for more of the same.

 

—Hunter S. Thompson, Fear and Loathing: On the Campaign Trail ’72

This above quote came to my attention courtesy of an article published at Counterpunch titled: Stop Trump! Stop Clinton!! Stop the Madness (and Let Me Get Off)!

Wish you were still with us.

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Why Didn’t the FBI Give Hillary Clinton Immunity and Spare Us the Drama?: New at Reason

Considering how many people surrounding the Hillary Clinton email controversy got immunity, perhaps it would’ve been easier if the Department of Justice simply granted immunity to Hillary Clinton.

David Harsanyi writes:

FBI Director James Comey, who testified in front of two congressional committees this week, still maintains that he was unable to recommend that the DOJ charge Clinton with mishandling classified documents because of insufficient evidence proving “intent”—although the actions themselves are irrefutably illegal.

Well, how exactly did he anticipate gathering this proof, when the DOJ had proactively shielded the five people tasked with setting up the private system and then destroying it? Was he hoping to extract a confession directly from Clinton?

Why would, for instance, a Clinton functionary like Cheryl Mills help prosecutors once she’d already secured safeguards against any criminal prosecution? While testifying in front of the House Judiciary Committee, Comey claimed that Mills was already “cooperative” and that the Justice Department had assured the FBI she had done nothing wrong.

If she were accommodating and completely innocent, why would she seek—and be given—immunity? A lawyer for Mills and Heather Samuelson, another one of the five, had already admitted the deal was struck to protect her clients from potential prosecution arising from “classification” on their laptops. Apparently, the DOJ was more convinced of their innocence than their lawyer was.

View this article.

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Gartman: “This Selling Cascade Could Become Very Serious Indeed”

After being “Only Very Slightly Net Long” heading into the latest market swoon, overnight Gartman flopped again, and may have doomed what seemed like another selloff (futures were down 0.5% at one point in the overnight session), with his latest forecast in which he says he would “not be at all surprised to see this selling cascade today and become very serious indeed.” Since that prediction, ES is up 0.6%.

Here is the highlight from latest note:

SHARE PRICES HAVE “GONE SOUTH” IN GLOBAL TERMS as seven of the ten markets comprising our International Index have fallen… three of which have fallen by more than 1%… as the news spread through the markets yesterday regarding the problems attendant to the Deutsche Bank. We are not privy to the goings-on in Germany at the bank and we are certain that there are myriad problems all of a sudden seemingly coming to a head that are causing the bank to be talked about in “Lehman”-like terms. The question is whether Merkel & Company shall come to the Bank’s aid and save it from failure, and although Ms. Merkel has said countless numbers of times that she has no intention of doing so, in the end she will. She shall have no choice. Germany… and by extension the whole of Europe, and buy even further extension… the industrialised world cannot abide the collapse of the Deutsche Bank. It will be bailed out. Other banks in Germany can and would be allowed to fail, but the Deutsche Bank cannot and will not be.

 

In the world of capital markets, perception is all-too-often reality; if the market “perceives” you as impaired, you are impaired and if the market “perceives” you as solvent, you are effectively insolvent… at least for the moment. This is the harsh reality of the market and as our old friend from 25 years, Mr. Barry Bausano, the Chairman of the Deutsche Bank’s hedge fund business said yesterday, even though the bank’s prime brokerage operation is very nicely profitable the bank still has “a perception issue.” Barry and others at the helm of the Bank’s various capital markets divisions have said that there have been no noticeable outflows of funds from the Bank, and given that that is so the Bank will likely weather the storm. Certainly we expect that that is true and at the moment we’ve no doubt but that that is indeed and in fact true. However, once again, in the capital markets, perception is all too often reality.

 

So, once again as the rumours swept through the capital markets yesterday mid-morning “risk happens fast.” Only a few hours before it appeared possible that the market here in the US would make new highs; instead, the veritable bottom fell out. Only a few hours before, the European markets were all moving pleasantly higher; instead, selling pressures erupted. By the day’s end, we’d seen “reversals” in the DJIA futures; in the NASDAQ futures; in the Russell 2000 and especially in the DAX and EUR 50 futures. We take this rather uncommonly large number of “reversals” very seriously, and given that this is the quarter’s end we’d not be at all surprised to see this selling cascade today and become very serious indeed. Risk does indeed happen fast, as our old friend,
Doug Kass, reminds everyone.

And just like that, the algos have been the green light.

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I Don’t See How Germany Can Contain the Deutsche Bank Collapse

Let’s talk about Deutsche Bank (DB).

Deutsche Bank is the 11th largest bank in the world. It has assets of $1.8 trillion and over ~$60 trillion in derivatives on its books.

From a balance sheet perspective, DB’s balance sheet is 50% the size of Germany’s GDP. By way of comparison, imagine if JP Morgan was a $9 TRILLION bank. That’s effectively DB’s status in Germany.

However, it’s DB’s derivative book that is the real problem as far as the markets are concerned. As I mentioned before, DB has ~$60 trillion in derivatives. And unlike the other derivatives giant of the financial world (JP Morgan with $52 trillion in derivatives), DB is based in Europe.

What are the differences?

Europe is where Negative Interest Rate Policy (NIRP) Brexit and exposure to a banking system that is entirely too laden with debt has proven a disastrous cocktail.

What precisely has hit DB remains to be seen. But something happened in the first two weeks of September that triggered a market meltdown. DB shares have fallen straight down a total of 27% since that time.

Now we are in full-blown panic mode. This bank is too big to bailout and too big to bail-in. Moreover that massive derivatives book connects DB to over 200 financial entities. Unwinding it will be catastrophic.

This could very well lead to a 2008 type Crash. To be blunt, I don't see how Germany or the ECB can contain it.

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