Month: October 2016

via http://ift.tt/2eVsVSx williambanzai7

Submitted by Erik Townsend via MacroVoices.com

Eclectica’s iconic manager, Hugh Hendry, was the featured interview on this week’s MacroVoices podcast. The entire interview is worth a listen and begins at 10:42.

The interview starts on the U.S. Dollar.

Hendry says that he’s long the dollar as is everyone else in the group of managers he respects. He opines that the pause in the dollar rally over the last year has been a result of the U.S. economy needing to regroup to prepare itself to cope with the pressure of a continuing, secular rise in the USD and the pressure that will bring upon the U.S. economy. But Hendry goes on to opine that he believes the transformation is complete and the dollar rally is set to resume.

Hendry urges caution in calling the last two weeks’ strength a “break out”, saying it may still be too early to tell whether the big move higher he sees for the dollar is upon us. But then he goes on to say that once the prior cycle high of about 104 on the DXY is exceeded, 110 comes into view next. He’s quick to caution that such a move would put considerable pressure on the U.S. economy.

 

When asked about European exit contagion in the wake of the Brexit referendum, Hendry focuses on the spread between German bunds and the Italian BTB, which is currently 130bps. Hendry observes that pre-2008, then spread remained under 30bps, then blew out to 600bps during the 2011-2012 European sovereign debt scare. Hendry opines that each 100bps of spread represents 10% probability of a systemic regime change, thus implying a 13% probability of the Euro collapsing based on the spread’s current 130bps reading.

 

Hendry believes that being long this spread offers an exceptional asymmetric risk/reward opportunity. He explains that the spread has consistently traded above 100 bps and he would consider a print below 100 to be a stop-out condition for the trade, implying a max loss of 30bps. Hendry believes that France or Italy dropping out of the Euro would blow the spread out by several hundred more bps, thus creating the asymmetric return opportunity.

When asked about the trade he has on in his fund, Hendry says that his team recently had a “eureka moment” and figured out how to redesign this trade, which has a negative carry when viewed in simple terms, such that they preserve the asymmetric of risk/reward while converting it to a positive-carry trade by adding another “European sovereign component to the trade”. Hendry conveniently leaves out the details of this mystery component, presumably because he views the strategy as proprietary.

MacroVoices host Erik Townsend then presses Hendry on his “benevolent” views toward Japan, asking whether the BOJ’s recent move to fully embrace yield curve management and expanding its balance sheet to own even more of the Nikkei changes Hendry’s view on Japan. Hendry responds by saying that the BOJ’s move actually reinforces his view, and does NOT offer any immediate catalyst for changing asset prices markedly.

 

Hendry emphasizes that Japan is not Europe. He says that unlike ECB which has to contend with appeasing numerous different sovereigns, BOJ has free reign to use whatever fiscal tools it wants to supplement monetary policy. Contrary to the yen-bearish views of so many of his peers, Hendry opines that repatriation of capital to Japan could strengthen the yen considerably. Hendry suggests that Japan should run bigger deficits, cut corporate tax rates, and “get things moving again”.

Hendry is then asked to explain the evolution of his views on DM equities. Townsend recalls how famously bearish Hendry was 5+ years ago, and observes that when Hendry first turned bullish, his comments seemed to imply that he still thought quantitative easing was crazy and immoral, but essentially thought “who knows how long they can keep this charade going”. Townsend then asks Hendry whether he still thinks it’s a “charade”, or if his view has evolved to thinking that a sustainable, secular recovery is in place.

Hendry first describes a “time stop-loss” on his former bearish views, saying that when you run a macro fund, if your view doesn’t play out in two years time, you have to throw in the towel and admit you were wrong. He said the clock ran out and that’s when he turned bullish.

In shocking contrast to his own remarks on the same subject five years earlier, Hendry opines that Ben Bernanke was “right and courageous”, and has succeeded in engineering a sustained recovery. Hendry goes on to say that QE has leveled the playing field between the creditor and debtor classes, by lowering interest rates to the point that wealth transfer from debtors to creditors is effectively arrested.

Townsend pushes back, pointing out that the consequence of all this policy has been that the world is now awash in upwards of $10tn in negative-yielding sovereign debt. Townsend points out that it’s basically impossible for governments to raise interest rates to historical norms, because it would be impossible to service all the new debt they’ve added to their balance sheets since the 2008 crisis. Townsend presses Hendry to explain how the “recovery” can be sustainable long-term if the major governments of the world are now saddled with so much debt that it’s literally impossible to repay in real terms.

 

Hendry retorts that while central banks have succeeded in making debt incredibly cheap, few borrowers are really using it. Many households cannot borrow for credit reasons, and Germany is running a balanced budget because there’s no political will to go to deficit spending.

Hendry emphasizes that we still have bond vigilantes and fear runaway inflation, but it’s very difficult for policy makers to create inflation and sovereign bond markets are gigantic. Hendry predicts that the private sector will impose tightening and slow the economy down on its own, even in the face of accommodative central bank policy.

Next, Townsend asks Hendry about his outlook for treasury yields in the context of these arguments. Townsend observes that bond giant Jeff Gundlach has declared that the 35-yr bull market in bonds is over, whereas Raoul Pal has suggested that the current back-up in yields is a buy-the-dip opportunity and U.S. 10-yr yields are eventually headed below 1%. Townsend asks Hendry who has the call right.
Hendry responds by saying that Gundlach has it right, but many people misunderstood his call. Hendry emphasizes that Gundlach never said yields were headed to the moon any time soon. He just said the bottom was in. Hendry thinks that U.S. 10-yr yields could remain in a trading range between 1.35% and 2.00% for the next several years.

 

Next, Townsend brings up what has effectively been a proxy war of conflicting views about yuan devaluation between Hendry and Kyle Bass in their respective recent Real Vision Television interviews. Townsend explains that in Kyle Bass’ most recent interview, he opines that the PBOC will have no choice, and will be forced to de-value massively in order to recapitalize their banking system after the mountain of bad debt Bass believes has been created since the GFC blows up. Hendry retorts that the Real Vision interviewer didn’t correctly represent his views, then proceeds to go on the offensive explaining his view that the United States would never allow PBOC to massively de-value the yuan as Bass has predicted they’ll be forced to.

Hendry thinks western analysts have failed to recognize that China isn’t Thailand or isn’t vulnerable to a 1990s Asian currency crisis-type event. Hendry believes China is a “grown-up nation” with the autonomy to use fiscal and monetary tools to shore up its economy. He says that the growing Chinese middle class and consumption running 34% of GDP paves the way for organic, sustainable domestic economic growth.

Hendry concludes his views on China by reminding the audience about his rule that if your macro view doesn’t play out within a couple of years, you have to abandon it. We assume this was his not-so-subtle way of suggesting that Kyle Bass has been wrong for more than two years and should give up and move on, but Hendry never says so explicitly.

Finally, Townsend switches gears and asks Hendry to comment on the personal experience of having built a brand around being the world’s most outspoken bear 5 years ago. Townsend reminds Hendry and the audience about his famous comment “advising people to panic”, and his former practice of “schooling Nobel laureates on how things work in the real world on National Television”.

Hendry takes the question in stride, and concedes that his business is considerably smaller today than it was in his heyday as the outspoken Scottish fund manager who advised everyone to panic. He describes the process of losing staff and finding the right size for his current enterprise, in what was a personal and revealing answer.

via http://ift.tt/2f6GZZZ Tyler Durden

Silicon Valley billionaire (and now pariah) Peter Thiel defended his support for Donald Trump in a speech this morning. The excellent oration wondered from the ignorance of the elites and the bankruptcy of the nation, to the endless and pointless wars and America's slumping quality of life…

 

*  *  *

Full Transcript:

THANK YOU VERY MUCH FOR HAVING ME HERE.

EVERYONE KNOWS WE HAVE BEEN LIVING THROUGH A CRAZY ELECTION YEAR. REAL EVENTS SEEM LIKE THE REHEARSALS FOR SATURDAY NIGHT LIVE.

ONLY AN OUTBREAK OF INSANITY WOULD SEEM TO ACCOUNT FOR THE UNPRECEDENTED FACT THAT THIS YEAR, A POLITICAL OUTSIDER MANAGED TO WIN A MAJOR PARTY NOMINATION.

TO THE PEOPLE WHO ARE USED TO INFLUENCING OUR CHOICES, THE WEALTHY PEOPLE WHO GIVE MONEY AND THE COMMENTATORS WHO GIVE REASONS WHY, IT ALL SEEMS LIKE A BAD DREAM.

DONORS DON'T WANT TO FIND OUT WHY WE GOT HERE, THEY JUST WANT TO MOVE ON. COME NOVEMBER 9, THEY HOPE EVERYONE ELSE WILL GO BACK TO BUSINESS AS USUAL. BUT IT IS THIS HEEDLESSNESS: THE TEMPTATION TO IGNORE IN DIFFICULT REALITIES INDULGED IN BY OUR CITIZENS THAT GOT US WHERE WE ARE TODAY.

A LOT OF SUCCESSFUL PEOPLE ARE TOO PROUD TO ADMIT IT SINCE IT SEEMS TO PUT THEIR SUCCESS IN QUESTION. BUT THE TRUTH IS, NO MATTER HOW CRAZY THIS ELECTION SEEMS, IT IS LESS CRAZY THAN THE CONDITION OF OUR COUNTRY. JUST LOOK AT THE GENERATION THAT SUPPLIES MOST OF OUR LEADERS. THE BABY BOOMERS. THEY ARE ENTERING RETIREMENT IN A STATE OF ACTUARIAL BANKRUPTCY. 54% OF THOSE OVER THE AGE OF 55 HAVE LESS THAN ONE YEARS WORTH OF SAVINGS TO THEIR NAME.

THAT IS A PROBLEM, ESPECIALLY WHEN THIS IS THE ONLY COUNTRY WHERE YOU HAVE TO PAY UP TO 10 TIMES AS MUCH FOR SIMPLE MEDICINES AS YOU WOULD PAY ANYWHERE ELSE. AMERICA'S OVERPRICED HEALTH CARE SYSTEM MIGHT HELP SUBSIDIZE THE REST OF THE WORLD, BUT THAT DOES NOT HELP AMERICANS WHO CANNOT AFFORD IT AND THEY HAVE STARTED TO NOTICE.

OUR YOUNGEST CITIZENS MAY NOT HAVE MEDICAL BILLS, BUT THEIR COLLEGE TUITION KEEPS ON INCREASING FASTER THAN THE RATE OF INFLATION, ADDING MORE EVERY YEAR TO OUR $1.3 TRILLION MOUNTAIN OF STUDENT DEBT. AMERICA HAS BECOME THE ONLY COUNTRY WHERE STUDENTS TAKE ON LOANS THEY CAN NEVER ESCAPE, NOT EVEN BY DECLARING BANKRUPTCY.

STUCK IN THIS BROKEN SYSTEM, MILLENNIALS ARE THE FIRST GENERATION THAT EXPECT THEIR OWN LIVES TO BE WORSE THAN THE LIVES OF THEIR PARENTS. WHILE AMERICAN FAMILY EXPENSES HAVE BEEN INCREASING RELENTLESSLY, THEIR INCOMES HAVE BEEN STAGNANT. IN REAL DOLLARS, IMMEDIATE HOUSEHOLD MAKES LESS MONEY TODAY THAT MADE 17 YEARS AGO. NEARLY HALF OF AMERICANS WOULD NOT BE ABLE TO COME UP WITH $400 IF THEY NEEDED IT FOR AN EMERGENCY.

YET, WHILE HOUSEHOLDS STRUGGLED TO KEEP UP WITH THE CHALLENGES OF EVERYDAY LIFE, THE GOVERNMENT IS WASTING TRILLIONS OF DOLLARS ON TAXPAYER MONEY ON FARAWAY WARS. RIGHT NOW, WE'RE FIGHTING FIVE OF THEM. IN IRAQ, SYRIA, LIBYA, AND SOMALIA.

IN THE WEALTHY SUBURBS OF WASHINGTON DC, PEOPLE ARE DOING JUST FINE. WHERE I WORK IN SILICON VALLEY, PEOPLE ARE DOING JUST GREAT. BUT MOST AMERICANS DON'T LIVE BY THE BELTWAY OR THE SAN FRANCISCO BAY. MOST AMERICANS HAVE NOT BEEN PART OF THAT PERSPECTIVE. IT SHOULDN'T BE SURPRISING TO SEE PEOPLE VOTING FOR BERNIE SANDERS OR DONALD TRUMP, WHO IS THE ONLY OUTSIDER (VERY FEW PEOPLE WHO VOTE FOR PRESIDENT HAVE EVER THOUGHT OF DOING SOMETHING SO EXTREME AS RUNNING FOR PRESIDENT. THE PEOPLE WHO RUN ARE OFTEN POLARIZING).

THIS ELECTION YEAR, BOTH MAJOR CANDIDATES ARE IMPERFECT PEOPLE TO SAY THE LEAST. I DON'T AGREE WITH EVERYTHING DONALD TRUMP HAS SAID AND DONE, AND I DON'T THINK THE MILLIONS OF OTHER PEOPLE VOTING FOR HIM DO EITHER. NOBODY THINKS HIS COMMENTS ABOUT WOMEN WERE ACCEPTABLE. I AGREE, THEY WERE CLEARLY OFFENSIVE AND INAPPROPRIATE. BUT I DON'T THINK THE VOTERS PULL THE LEVER TO ENDORSE A CANDIDATE'S FLAWS.

IT IS NOT A LACK OF JUDGMENT THAT LEADS AMERICANS TO VOTE FOR TRUMP, WE ARE VOTING FOR TRUMP BECAUSE WE JUDGE THE LEADERSHIP OF OUR COUNTRY TO HAVE FAILED.

THIS JUDGMENT HAS BEEN HARD TO ACCEPT FOR SOME OF THE COUNTRIES MOST FORTUNATE, SOCIALLY PROMINENT PEOPLE. IT CERTAINLY HAS BEEN HARD TO ACCEPT FOR SILICON VALLEY, WHERE MANY PEOPLE HAVE LEARNED TO KEEP QUIET IF THEY DISSENT FROM THE COASTAL BUBBLE. LOUDER VOICES HAVE SENT A MESSAGE THAT THEY DO NOT INTEND TO TOLERATE THE VIEWS OF ONE HALF OF THE COUNTRY.

THIS INTOLERANCE HAS TAKEN ON SOME BIZARRE FORMS. THE ADVOCATE, A MAGAZINE WHICH ONCE PRAISED ME AS A GAY INNOVATOR, EVEN PUBLISHED AN ARTICLE SAYING THAT AS OF NOW I AM, AND I QUOTE "NOT A GAY MAN" BECAUSE I DON'T AGREE WITH THEIR POLITICS. THE LIE IN THE BUZZWORD OF DIVERSITY COULD NOT BE MADE MORE CLEAR. IF YOU DON'T CONFORM, THEN YOU DON'T COUNT AS DIVERSE, NO MATTER WHAT YOUR PERSONAL BACKGROUND.

FACED WITH SUCH CONTEMPT, WHY DO VOTERS STILL SUPPORT DONALD TRUMP? EVEN IF THEY THINK THE AMERICAN SITUATION IS SERIOUS, WHY DO THEY THINK TRUMP OF ALL PEOPLE CAN MAKE IT BETTER?

I THINK IT IS BECAUSE OF THE BIG THINGS THAT TRUMP GETS RIGHT. FOR EXAMPLE, FREE TRADE HAS NOT WORKED OUT WELL FOR ALL OF AMERICA. IT HELPS TRUMP THAT THE OTHER SIDE JUST DOES NOT GET IT. ALL OF OUR ELITES TREAT FREE TRADE AND EXPLAIN THAT CHEAP IMPORTS MAKE EVERYONE A WINNER ACCORDING TO ECONOMIC THEORY. BUT IN ACTUAL PRACTICE, WE'VE LOST TENS OF THOUSANDS OF FACTORIES AND MILLIONS OF DOLLARS TO FOREIGN TRADE. HEARTLAND HAS BEEN DEVASTATED. MAYBE ELITES REALLY BELIEVE NO ONE LOSES OR MAYBE THEY DON'T WORRY ABOUT IT TOO MUCH BECAUSE THEY THINK THEY ARE AMONG THE WINNERS.

THE SHEER SIZE OF THE U.S. TRADE DEFICIT SHOWS SOMETHING HAS GONE BADLY WRONG. THE MOST DEVELOPED COUNTRY IN THE WORLD SHOULD BE EXPORTING CAPITAL TO LESS DEVELOPED COUNTRIES. INSTEAD, THE UNITED STATES IS IMPORTING MORE THAN $500 BILLION EVERY YEAR. THAT MONEY FLOWS INTO FINANCIAL ASSETS, DISTORTS OUR ECONOMY IN FAVOR OF MORE BANKING AND MORE FINANCIAL'S ASIAN AND GIVES WELL-CONNECTED PEOPLE WHO BENEFIT A REASON TO DEFEND THE STATUS QUO. BUT NOT EVERYONE BENEFITS, AND THE TRUMP VOTERS KNOW IT.

TRUMP VOTERS ARE ALSO TIRED OF WAR. WE HAVE BEEN AT WAR FOR 15 YEARS AND WE HAVE SPENT MORE THAN $4.6 TRILLION. MORE THAN 2 MILLION PEOPLE HAVE LOST THEIR LIVES AND MORE THAN 5000 AMERICAN SOLDIERS HAVE BEEN KILLED. BUT WE HAVE NOT ONE. THE BUSH ADMINISTRATION PROMISED $50 BILLION COULD BRING DEMOCRACY TO IRAQ. INSTEAD, WE SQUANDERED 40 TIMES AS MUCH TO BRING ABOUT CHAOS. EVEN AFTER THESE BIPARTISAN FAILURES, THE DEMOCRATIC PARTY IS MORE HAWKISH TODAY THAN AT ANY TIME SINCE IT BEGAN THE WAR IN VIETNAM. HARKING BACK TO THE NO-FLY ZONE BILL CLINTON ENFORCED OVER IRAQ BEFORE BUSH COSTS FAILED WAR, NOW HILLARY CLINTON HAS CALLED FOR A NO-FLY ZONE OVER SYRIA. INCREDIBLY, THAT WOULD BE A MISTAKE EVEN MORE RECKLESS THAN INVADING IRAQ. SINCE MOST OF THE PLANES FLYING OVER SYRIA ARE RUSSIAN PLANES, CLINTON'S PROPOSED COURSE OF ACTION WOULD INVOLVE US IN A MESSY CIVIL WAR — IT WOULD RISK A DIRECT NUCLEAR CONFLICT.

WHAT EXPLAINS THIS EAGERNESS TO ESCALATE A DANGEROUS SITUATION? HOW COULD HILLARY CLINTON BE SO WILDLY OVEROPTIMISTIC ABOUT THE OUTCOME OF WORK?

I WOULD SUGGEST IT COMES FROM A LOT OF PRACTICE. FOR A LONG TIME, OUR ELITES HAVE BEEN IN THE POWER A LONG TIME, OUR ELITES HAVE BEEN IN THE HABIT OF DENYING DIFFICULT REALITIES. THAT IS HOW BUBBLES FORM. WHEREVER THERE'S A HARD PROBLEM BUT PEOPLE WANT TO BELIEVE IN AN EASY SOLUTION, THEY WILL BE TEMPTED TO DENY REALITY AND INFLATED BUBBLE. SOMETHING ABOUT THE EXPERIENCE OF THE BABY BOOMERS, WHOSE LIVES HAVE BEEN SO MUCH EASIER THAN THEIR PARENTS OR THEIR CHILDREN HAS LED THEM TO BUY INTO BUBBLES AGAIN AND AGAIN. THE TRADE BUBBLE SAYS EVERYONE IS A WINNER. THE WAR BUBBLE SAYS VICTORY IS JUST AROUND THE CORNER, BUT THESE OVEROPTIMISTIC STORIES SIMPLY HAVE NOT BEEN TRUE AND VOTERS ARE TIRED OF BEING LIED TO.

IT WAS BOTH INSANE AND SOMEHOW INEVITABLE THAT D.C. INSIDERS EXPECTED THIS ELECTION TO BE A RERUN BETWEEN THE TWO POLITICAL DYNASTIES WHO LET US THROUGH THE TWO MOST GIGANTIC FINANCIAL BUBBLES OF OUR TIME. PRESIDENT GEORGE W. BUSH PRESIDED OVER THE INFLATION OF THE HOUSING BUBBLE SO BIG THAT IT'S COLLAPSE IS STILL CAUSING ECONOMIC STAGNATION TODAY. BUT WHAT IS STRANGELY FORGOTTEN IS THAT THE LAST DECADE HOUSING BUBBLE WAS JUST AN ATTEMPT TO MAKE UP FOR THE GAINS THAT HAVE BEEN LOST THE DECADE BEFORE THAT. IN THE 1990'S, PRESIDENT BILL CLINTON PRESIDED OVER AN ENORMOUS STOCK MARKET BUBBLE AND DEVASTATING CRASH IN 2000 JUST AS HIS SECOND TERM WAS COMING TO AN END. THAT IS HOW LONG THE SAME PEOPLE HAVE BEEN PURSUING THE SAME DISASTROUS POLICIES.

NOW THAT SOMEONE DIFFERENT IS IN THE RUNNING, SOMEONE WHO REJECTS THE STORIES THAT TELL US EVERYTHING IS FINE, HIS LARGER-THAN-LIFE PERSONA ATTRACTS A LOT OF ATTENTION. NOBODY WOULD SUGGEST DONALD TRUMP IS A HUMBLE MAN. BUT THE BIG THINGS, HE IS RIGHT ABOUT AN AMOUNT TO A MUCH-NEEDED DOSE OF HUMILITY. HE HAS QUESTIONED THE POOR — THE CORE CONCEPT OF AMERICAN EXCEPTIONALISM.

HE DOESN'T THINK THE FORCE OF OPTIMISM ALONE CAN CHANGE REALITY WITHOUT HARD WORK. JUST AS MUCH AS IS IS ABOUT MAKING AMERICA GREAT, TRUMP'S AGENDA IS ABOUT MAKING AMERICA A NORMAL COUNTRY, A NORMAL COUNTRY DOES NOT HAVE A HALF TRILLION DOLLAR TRADE DEFICIT. A NORMAL COUNTRY DOES NOT FIGHT FIVE SIMULTANEOUS UNDECLARED WARS.

IN A NORMAL COUNTRY, THE GOVERNMENT ACTUALLY DOES ITS JOB. TODAY, IT IS IMPORTANT TO RECOGNIZE THE GOVERNMENT HAS A JOB TO DO. VOTERS ARE TIRED OF HEARING CONSERVATIVE POLITICIANS SAYING GOVERNMENT NEVER WORKS. THEY KNOW GOVERNMENT WAS NOT ALWAYS THIS BROKEN. THE MANHATTAN PROJECT, THE INTERSTATE HIGHWAY SYSTEM, THE APOLLO PROGRAM, WHATEVER YOU THINK OF THESE VENTURES, YOU CANNOT DOUBT THE COMPETENCE OF THE GOVERNMENT THAT GOT THEM DONE, BUT WE HAVE FALLEN VERY FAR FROM THAT STANDARD. WE CANNOT LET FREE-MARKET IDEOLOGY SERVE AS AN EXCUSE FOR DECLINE.

NO MATTER WHAT HAPPENS IN THIS ELECTION, WHAT TRUMP REPRESENTS IS NOT CRAZY AND IT'S NOT GOING AWAY. HE POINTS TOWARD A NEW REPUBLICAN PARTY BE ON THE DOGMAS OF REAGANISM. HE POINTS BEYOND THE REMAKING OF ONE PARTY TO A NEW AMERICAN POLITICS THAT OVERCOMES NILE, REJECTS BUBBLE THINKING AND RECKONS WITH REALITY. WHEN THE DISTRACTING SPECTACLES OF THIS ELECTION SEASON ARE OVER AND THE HISTORY OF OUR TIME IS WRITTEN, THE ONLY IMPORTANT QUESTION WILL BE WHETHER OR NOT THAT NEW POLITICS CAME TOO LATE. THANK YOU.

via http://ift.tt/2fozAsF Tyler Durden

Three weeks ago, Citi’s political analyst Tina Fordham, who listed the numerous potential October surprise “black swans” that could affect the election yet not even she could imagine the return of Anthony Weiner to the front and center stage of politics…

… said that she was getting a Brexity feeling about the November election. As she put it in early October, “this is an unusual juncture but we keep looking at it through the same kinds of lenses. What if it’s all wrong because society, technology, opinion polling methods, and everything else don’t capture marginalized voters in the way they might once have?” “What if” indeed.

The reason for the rhetorical question is that according to Fordham, this presidential race feels more like an election in a developing nation where public distrust in government is high and conspiracy theories are rife. Markets seem unaware how much that low trust raises the risk of an anti-establishment vote. Fordham has focused on the Gallup World Poll on public health, which analyzes two decades’ worth of health records of Trump supporters. The numbers show a correlation between the increase in the number of people going through difficult times – as measured by suicide rates, depression, mental illness and drug addiction – and the rise in Trump’s popularity, Fordham said.

“This is the kind of thing that investors just don’t normally run into, but it provides another useful way to think about things because income inequality is necessary but not sufficient,” she said. “There is something more subtle going on about public expectations and exhaustion and a sense of corruption, elite abuse of power, and lack of control.”

“I’m getting this Brexit-y feeling and I know other investors are as well,” she said. “The thinking is: I didn’t expect Brexit, so I better assume Trump is going to win. That element of investor psychology is at play here.”

* * *

Fast forward to today when in a follow up note, Fordham answers the question whether the FBI announcement is a game changer.

She writes that Friday’s surprise announcement by FBI Chief Comey that additional emails would be reviewed as part of the agency’s ongoing investigation into Clinton’s use of a private email server was sufficiently vague and unusual to rattle markets and see prediction market odds drop from 81% to 75%. She notes that she had warned throughout the campaign that Black Swan risks, including scandals and information warfare, are extraordinarily high, and hence have been less bullish for a Clinton victory than consensus.

She then observes that “these developments do constitute an “October Surprise” that could have a meaningful impact on the race” and cautions that this may not be the end of it: “We continue to emphasize the potential for more Black Swan events emerging making things more complicated for forecasters and pollsters.“

Fordgam also says that she expects high anxiety to continue to November 8th:

The extent to which the 11th Hour development will influence voter behavior is likely to remain uncertain right up until Election Day; typically it takes at least a week before new developments filter through to polls. With just over a week to go, the impact of the FBI’s announcement may be just beginning to register, exacerbating uncertainty. Even before Friday, Clinton’s lead had tightened, from 6.4pp on 20 October in the RCP average to 5.6pp by last Thursday (27 October), in polling conducted between 14 and 27 October, prior to the news breaking. In addition to a lag before polls reflect developments, it is highly unlikely that the FBI will come to a conclusion about the nature of the emails, whether classified, confidential or otherwise, before elections.

That said, Citi’s “Base Case” of a Clinton victory remains unchanged, however she adds that Congressional races will likely be affected:

Our probability of a 75% probability of a Clinton victory remains unchanged due to our longstanding caution over the risks of Black Swans, but these developments have added a significant obstacle to the Clinton campaign, and are likely to further dent voter confidence. However, we do not expect her supporters will switch their votes as a result; an ABC News/Washington poll (conducted 25-28 October) finds that just 7% of Clinton voters say the news makes them less likely to support her. Furthermore, a significant amount of early voting has already taken place. The most concrete impact of the FBI announcement will likely be upon turnout; potentially depressing turnout of Clinton voters, less enthusiastic about voting to start with, and “downticket” voting in Congressional races, where Clinton’s boost in the national polls had looked likely to propel more Democrats to victory in Congress. Here too, our view had been that a divided Congress was still the most likely outcome and we think this is still the case.

In other words, with 8 days left, the black swans in this presidential campaign may remain true to their name.

via http://ift.tt/2esW3QC Tyler Durden

Submitted by Jeff Thomas via InternationalMan.com,

In every country where a revolution has taken place (whether it be a “soft” revolution or a violent overthrow), those who are part of the winning team make a point of glorifying the revolution and all the “good” that it has brought. For this reason, the inhabitants of most countries where a revolution has taken place at some point in their history will believe that the revolution was positive. In countries where that revolution was opposed, the people will most likely regard the revolution as negative.

As an example, Frenchmen tend to praise their Revolution of 1789, in which the aristocracy were overthrown. Since then, the emphasis has been on the “little man.” The little man would not only be treated equally to the aristocrat, he would receive preferential treatment. Not surprisingly, this devolved into the socialism that dominates France today. In spite of the dysfunctionality of the French system, most Frenchmen fondly praise the Revolution and the “freedom” that it ostensibly created for them.

And then we have the Cuban Revolution of 1959. Its stated purpose was to overthrow the aristocratic Batista Regime and replace it with one that favoured the campesinos. The aristocracy was removed and ownership of most everything moved to the state. There is most certainly greater equality in Cuba today (albeit at a very low level), and yet we’re taught to regard the Cuban Revolution as having been destructive, as it devolved into socialism. Although the current system is largely dysfunctional, the Cuban people, even today, speak of the freedom that the Revolution created for them.

These two examples are similar, and yet Westerners are taught to regard the French government as an enlightened body of men and women who spend their waking hours legislating for ever-increased goodness for the French people, yet we’re equally taught to regard the Cuban government as tyrannical rulers lording over an oppressed people.

The perception of the results of the respective revolutions would seem to have little to do with the reason for the revolution, its immediate outcome, or its eventual outcome, and have more to do with whether the leadership of the country is “on our side” or not. Those countries where the leaders align themselves with our own country are good and enlightened, whilst the leaders who do not align themselves with our country are tyrannical dictators. The true level of freedom for the people is not really at issue.

“We’re Not Going to Take it Anymore”

So let’s take a thumbnail view of revolutions. The premise behind the desire for revolution is always the same – a segment of the population feels that the government (and very possibly their cohorts) have become oppressive and should be overthrown. When the history is written by the victors, they will endeavour to create the impression that the entire population rose up; however, this is never the case. A dissatisfied minority succeeded in taking over.

So what, then, of the majority? Well, prior to the revolution, they sat along the sidelines and tolerated whatever perceived injustices the former government imposed upon them. During the revolution, they often sat on the sidelines, hoping to have as little involvement as possible, and, after the revolution, they generally sat on the sidelines, hoping to benefit from the new regime, or at least avoid being victimised.

In Russia in 1917, a relatively small number of people overthrew the aristocracy and were then faced with the problem of taking over. They had no experience in this and didn’t know where to begin. Enter Leon Trotsky and Vladimir Lenin, who had little to do with the revolution itself but, through funding from London and New York banks, were able to pay the Russian military and police to establish order, to a cursory degree. Once this was achieved, they used the military and police to establish order to a ruthless degree. (Not exactly saving the little man from the oppression of the aristocracy.) As Mister Lenin himself said,

“One man with a gun can control one hundred without one.”

In the aforementioned France in 1789, the aristocracy was overthrown by a relatively small number of revolutionaries, and, again, the victors had no real experience in running a country. Enter Maximilien Robespierre, a lawyer with a flair for control and a contempt for the hoi polloi. However, he was good at rhetoric, and the people cheered as he lopped off heads. This in spite of the fact that he most certainly did not deliver “freedom” to the French people, only the illusion of it. As he himself stated,

“The secret of freedom lies in educating people, whereas the secret of tyranny is in keeping them ignorant.”

Meet the New Boss – Same as the Old Boss

And so it has gone, in one revolution after another. Whether it be a soft revolution, or a violent one, it’s generally followed by a disorganised and often violent period, where commerce, social stability, and freedom suffer, at the very least, for as long as it takes the new management to pull it all together, and, in most cases, long thereafter. From Juan Perón in Argentina, the Shah in Iran, Hugo Chávez in Venezuela, and countless others, revolution has meant diminished liberty and hard economic times.

Meet the New Boss – Worse Than the Old Boss

In some cases, such as Mao Tse-tung in China, Idi Amin Dada in Uganda, and Pol Pot in Cambodia, conditions worsened considerably after the revolution had “freed the people” – sometimes for decades.

It should be said that there have been a few cases of both soft and violent revolutions in which the new leaders were truly visionary and ushered in an era of greater freedom, such as the American Revolution of 1776, Corazon Aquino in the Philippines, and Nelson Mandela in South Africa. Yet, even in these cases, the rot set in almost immediately through individuals within the new governments who sought to recreate authoritarian power within an otherwise positive takeover.  

Be Careful What You Wish For

The American Revolution notwithstanding, violent revolution almost never ends well. The odds are poor that you’ll get a more just leader or the greater freedoms that the revolutionaries have promised.

Today we’re observing the deterioration of the world’s most prominent capitalistic countries, all at the same time. Each has devolved into a fascist state. Again, to quote Mister Lenin,

“Fascism is capitalism in decline.”

Quite so. And, like many Russians in the early days of the twentieth century, we see an increasing number of citizens of the former “free world” realising that the decline of their countries is baked in the cake… that things are not likely to improve in their lifetimes.

And so, many fantasise that a revolution of some sort will occur. They hope for a soft revolution (virtually no chance of that happening) or a violent one – possibly generated by the millions of gun owners across the country. Unfortunately, no amount of handguns and assault weapons will equal their government’s arsenal of tanks, drones, chemical weapons, etc. A revolt could occur, and spontaneous nationwide guerrilla tactics could make it difficult to put down, but the likely outcome would be years of strife and bloodshed, followed by dramatically increased authoritarian rule.

A third option might be to accept that, yes, the decline into fascism is a dead end, but then so, in all likelihood, is revolution. That being the case, those who see two possible negative outcomes and no positive one might take the simpler step of internationalising – moving to one of the many countries that are not presently on the ropes.

Unfortunately, most people have no idea what really happens when a government goes out of control, let alone how to prepare… The coming economic and political collapse is going to be much worse, much longer, and very different than what we’ve seen in the past. That’s exactly why New York Times best-selling author Doug Casey and his team just released an urgent video. Click here to watch it now.

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For months now we have been writing about the collapse of class 8 truck orders.  For the month of September, net class 8 orders were down 16% YoY while LTM orders were down a staggering 41%.  In fact, the level of trailing 12-month net orders is the lowest since January 2011 with YoY changes now in negative territory for 19 consecutive months.

 

Therefore, it should come as little surprise that large trucking companies in the U.S. are being forced to slash fleets amid slumping demand and slack capacity.  According to the Wall Street Journal, several U.S. trucking companies, including Swift, Werner and Covenant, have all been forced to cut 1,000s of trucks from their fleets as “overcapacity has driven down pricing.”  Of course, all this means that class 8 truck manufactures are unlikely to see an uptick in new orders anytime in the near future with Werner promising it won’t add trucks “until they see meaningful improvement in the freight and rate markets.”

“We haven’t seen any difficulty in finding trucks,” said Ken Forster, chief executive of logistics company Sunteck Transport Group, a broker based in Jacksonville, Fla., that finds and books trucks for freight shippers. “It’s clear that overcapacity has driven down pricing.”

 

In quarterly earnings reports this month, Swift Transportation Co., Werner Enterprises Inc. and Covenant Transportation Group Inc. said they have pulled a combined hundreds of trucks from service since the second quarter.

 

Idling trucks is a way large fleets can quickly reduce capacity to match demand, which has stagnated this year amid uneven retail imports and sluggish growth for manufacturers.

 

Swift, the country’s largest truckload carrier, counted 581 fewer trucks in the third quarter than it did this time last year, and plans to cut an additional 200 trucks in the fourth quarter. The company’s fleet tops 19,000 big rigs.

 

Werner, the fifth-largest U.S. truckload carrier, according to SJ Consulting Group, said it cut its fleet by 240 trucks in the quarter ended Sept. 30 from a year earlier. The company posted a 41% drop in third-quarter net profit, to $18.9 million, and said in its earnings statement that it won’t add trucks “until we see meaningful improvement in the freight and rate markets.”

That said, we wouldn’t hold our breath waiting for demand and pricing to rebound.  As Barclays points out, consumer goods imports have continued to remain very weak in 2016 which they think could “presage a slowdown in household demand.”  Moreover, Barclays points out that amongst durable goods orders only autos have held up over the past several months amid overall declines for the larger basket though even autos have seemingly “reached a plateau.”

Weakness in durable goods orders and shipments add to our unease over our manufacturing outlook and poses a downside risk to our forecast. Core capital goods orders fell 1.2% in September, a much greater than expected decline and one that erased much of the nascent strength we had begun to perceive in the series over the past few months. Looking beyond the month-to-month fluctuations in shipments and orders, neither series has shown any tendency to recover, following their steep declines in 2014 and 2015 (Figure 4). Amongst key categories of durable goods orders, only motor vehicles orders have shown consistent strength over the past few years and even these orders have moved largely sideways over the past year, as the industry seems to have reached a plateau.

 

A variety of indicators continue to point to strength in consumption growth, including a solid housing market and the 2.1% growth in this morning’s GDP release. Despite these signs, weak consumer goods imports (Figure 3) pose a risk to our outlook. Most consumer goods are imported, and therefore, the consistently negative y/y growth rates of consumer goods imports this year could presage a slowdown in household demand.

 

 

While orders of core capital goods have also fallen.

 

Of course, the real question is exactly how the Russians were able to manipulate so much financial data in an obvious attempt to disrupt the U.S. presidential election?

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