Month: January 2017

Under assault from foreign governments, domestic CEOs, and thousands of protesters across the nation, members of the Trump administration were stern in their refusal to budge, and were unified in their support of the president’s sweeping executive order that bars refugees and people from seven nations from entering the U.S. 

Repeating a phrase first uttered by Trump, top aides to the president denied that the immigration order amounted to a Muslim ban and pointed to the Obama administration for identifying the seven countries included in the order. The Trump team also defended the executive order’s at times botched implementation amid backlash from some lawmakers and Federal Judges blocking the partial immgiration order.

Among the more vocal defenders of Trump were top aide Kellyanne Conway, who on Sunday emphasized the importance of having safe borders, suggesting that the small number of people who were inconvenienced by the order was worth it to keep the country safe. She said 325,000 people “from overseas came into this country just yesterday through our airports.”

“You’re talking about 300 and some who have been detained or are prevented from gaining access to an aircraft in their home countries,” Conway said on “Fox News Sunday.” “Thats 1 percent. And I think in terms of the upside being greater protection of our borders, of our people, it’s a small price to pay.” She also echoed Trump and insisted the immigration order was not a Muslim ban, even as some Democratic lawmakers have argued the opposite. 

“These seven countries, what about the 46 majority-Muslim countries that are not included? Right there, it totally undercuts this nonsense that this is a Muslim ban,” Conway said.   “This is a ban on prospective travel from countries, trying to prevent terrorists in this country, from countries that have a recent history of training and exporting and harboring terrorists.”

Returning the attack, Conway said the list of seven countries included in the order actually came from former President Obama’s administration, which it did as per a DHS announcement from February 2016. In February 2016, the Obama administration added Libya, Yemen and Somalia to a list of “countries of concern” with respect to its visa waiver program. Iran, Syria, Iraq and Sudan were already on the list, according to a release from the Department of Homeland Security.

“These are countries that have a history of training, harboring, exporting terrorists,” Conway said. She added that the president will “certainly keep identifying threats and risks.”

* * *

White House spokesman Sean Spicer also highlight the Obama administration’s role for initially flagging the seven “countries of particular concern.”  “The Obama administration put these first and foremost,” he said on ABC’s “This Week.”

He similarly noted there are 46 other Muslim-majority countries not included in the seven listed and defended the president for following through on the promises he made during his campaign.

“This is nothing new,” Spicer said. “President Trump talked about this throughout the campaign and throughout the transition. The president is just implementing the policies he campaigned on” he added noting that protecting the nation and its people is the No. 1 priority of the Trump administration.

* * *

In a testy exchange with Chuck Todd, White House Chief of Staff Reince Priebus was the third to reiterate that the seven countries included in the order were identified by the Obama administration as “the seven most dangerous countries in the world in regard to harboring terrorists and affirmed by Congress multiple times.” Priebus also defended the order’s implementation, saying there shouldn’t have been a “grace period” put on the order.

“Then, people that want to do bad things to Americans would just move up their travel date two days in order to get into the country before the grace period’s over,” he said on NBC’s “Meet the Press.”

“I think it’s one of these things that, and if you ask a lot of people at the Customs and Border patrol, would just tell you you got to rip off the band-aid and you have to move forward.”
 
As noted earlier, Priebus also clarified the order, saying it doesn’t affect green card holders. “We didn’t overrule the Department of Homeland Security, as far as green card holders moving forward, it doesn’t affect them,” Priebus said on NBC’s “Meet The Press.” But Priebus noted if a person is traveling back and forth to one of the seven countries included in that order, that person is likely to be “subjected temporarily with more questioning until a better program is put in place.”

“We don’t want people that are traveling back and forth to one of these seven countries that harbor terrorists to be traveling freely back and forth between the United States and those countries,” he said. He clarified that it is up to the “discretionary authority” of a Customs and Border Patrol agent whether people traveling back and forth to these seven countries receive extra questioning. Priebus then added that other countries may need to be added to the executive order in the future.

“But in order to do this in a way that was expeditious, in a way that would pass muster quickly,” he said, “we used the 7 countries that have already been codified and identified.” He said the order was “done for the protection of Americans, and waiting another three days, waiting another three weeks is something that we don’t want to get wrong.”

Priebus’ bottom line: Trump won’t apologize for keeping Americans safe: “President Trump is not willing to get this wrong,” Priebus said, “which is why he wants to move forward quickly and protect Americans…. So we apologize for nothing here.” 

Meanwhile the symbolic pressure from tens of thousands of protesters, 16 Democratic attorneys general who are seeking to overturn the Trump executive order, at least 11 Republican members of Congress, and countless civil rights groups and CEOs continues to mount with some confident that the matter will end up before the Supreme Court, and lead to even greater social polarization.

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By the SRSrocco Report,

The Silver Market will experience a significant trend change in the future due the unraveling of the paper markets.  Already we are witnessing a lot of political turmoil and havoc as President-elect Donald Trump gets ready to take over the White House in the next few days.

It’s also logical to assume the policy changes President-elect Trump wants to make will cause serious ramifications to the highly leveraged debt-based fiat monetary system… whether he realizes it or not.

Craig over at TFMetalsReport.com recently interviewed Paul Myclhresst about the huge problem the Chinese government is dealing with as they liquidate Dollars to prop up their banking and economic system.  I highly recommend listening to that interview if you haven’t.

Thus, the continued liquidation of U.S. Dollar Reserves by China and other countries is probably the reason for the ongoing decline in International Reserves covered in Hugo Salinas Price’s newest article, The Further Decline In International Reserves:

Over the past 29 months, the decline in Reserves took place at a rate of about $42 billion dollars a month. At this rate, by the end of 2017 International Reserves will likely decline by another $504 billion dollars, to $10.31 Trillion, which will increase the decline from the peak in 2014 to 14.31%.

As we can see from Hugo’s chart above, countries continue to liquidate their official reserves (mostly U.S. Dollar reserves) to prop up their financial and economic systems.  This is a very BAD SIGN… likely to get much worse in the future.

The Silver Market Will Experience A Huge Trend Change In The Future

The Global Silver Market will experience a huge trend change in the future, thus impacting the price in a BIG WAY.  The are two critical reasons why this will occur:

1) Cracks In the Highly Leveraged Debt Based Fiat Monetary System will force investors into purchasing silver to protect wealth
2) The 17 consecutive years of annual silver deficits totaling 1.8 billion oz, suggests the easy to acquire silver is now in tight hands.  Which means, when investors finally start to rush into silver, there will be very little available to be purchased, only at much higher prices

Let’s take a look at the Global Silver Market annual net balances from 1975 to 2016:

Let me explain this chart as it contains some interesting trend changes.  First, the majority of annual net surpluses occurred from 1975-1987.  This was after the U.S. and British Govt’s colluded to start the Gold & Silver Futures trading markets, which funneled investors funds into paper precious metals rather than physical.

You can read more details on this in my article, PRECIOUS METALS INVESTORS: Are You Ready For The Great Financial Enema.

This was also the same time when governments and big investors were dumping old silver coins onto the market that were no longer being used as currency.  You will notice that in 1978 the net silver surplus was very low.  This was due to the huge demand by investors as the price of silver skyrocketed.  However, as the silver price was capped by the “Financial Doctors” at the Fed and CME Group in 1980, many investors dumped silver back into the market.

According to GFMS’s data, there was a 306 million oz (Moz) surplus of silver that year.  And, as the silver price continued to decline in the 1980’s, more silver was dumped into the market, especially in 1983 (140 Moz) and 1984 (149 Moz).

I don’t want to get into too much detail from years 1987-1999, but annual net surpluses continued as governments such as China, Russia and India sold official silver stocks into the market.  But, this all changed in 2000 when the Global Silver Market started to experience net deficits.

And… since 2000, the Global Silver Market has experienced 17 consecutive years of net silver deficits.  According to GFMS and the Silver Institute, the world will suffer another 185.5 Moz net deficit in 2016.

So, how can the Global Silver Market suffer 17 years worth of consecutive silver deficits?  Well, because there was over 2 billion oz of silver surpluses (1975-1999)  put away for a rainy day:

Of course these figures are best estimates and do come from an official source that may have the motivation to under-report the real situation, but we can clearly see that a lot of silver has moved out of the market and is now likely be held by extremely tight hands.

While the market is nothing more than one huge “Intervention”, these official figures reporting 17 years of consecutive net silver deficits means the silver market is poised for something extremely big.  And, I am not saying that just because I am a silver investor.  The PROOF is right in front of us.   No need to hype something that is totally making the CASE for us.

The Gold & Silver Paper Markets Are In Serious Trouble

While many precious metals investors believe that market intervention and manipulation can continue indefinitely, we are already witnessing the collapse of International Reserves.  Furthermore, if President-elect Trump is allowed to run the White House for a while, we are going to see serious financial dislocations due to trade wars and increased U.S. inflationary pressures.

In addition, GFMS and the Silver Institute forecast continued net annual silver deficits for the next several years (at least) as global silver production declines while demand continues to be strong.  This will be just more FUEL for the SILVER MARKET FIRE ahead.

Again, this is not hype.  What I am explaining here is the same setup as those characters portrayed in the movie the BIG SHORT, who were betting against the disaster called the Mortgage-Backed Securities industry.  They knew it was a huge house of cards ready to implode… it was just a matter of time.

While the gold market will likely experience a huge run, I believe silver will outperform gold many times over.  This is due to the fact that there is about the same amount of invest-able silver in the world as there is gold:

According to the best sources I could come across, there is about 2.2 billion oz of investment gold and 2.5 billion oz of investment silver in the world today.  Of course, there is likely more physical gold and silver we don’t know about, but it will not change the ratio all that much.

That being said, just a doubling of physical gold and silver demand will put a lot more pressure on the silver price than gold as big traders and hedge funds jump aboard for larger percentage gains.

As we begin to see fireworks going off in the United States as President-elect Trump stirs up the pot, 2017 will likely be the year things really start to fall apart.

IF YOU ARE GOING TO STORE PRECIOUS METALS…… WHY PAY MORE???

Lastly, if you haven’t checked out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page, I highly recommend you do.

Check back for new articles and updates at the SRSrocco Report.

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A president who chooses to ban immigrant refugees from majority-Muslim nations on the basis of national security and fears over terrorism is – according to the mainstream media and 1000s of Americans at various protests today – a vicious, soul-less, fascist, Islamophobic racist, and as bad as hitler (we are paraphrasing).

So what does that make President Obama – who halted all Iraqi refugees entering America for six months in 2011?

In 2015, the seemingly forgetful President Obama tweeted…

Slamming the door in the face of refugees would betray our deepest values. That's not who we are. And it's not what we're going to do.

— President Obama (@POTUS44) November 18, 2015

Just four short years after the State Department in 2011 stopped processing Iraq refugee requests for six months after the Federal Bureau of Investigation uncovered evidence that several dozen terrorists from Iraq had infiltrated the United States via the refugee program.

As The Federalist reported, after two terrorists were discovered in Bowling Green, Kentucky, in 2009, the FBI began reviewing reams of evidence taken from improvised explosive devices (IEDs) that had been used against American troops in Iraq. Federal investigators then tried to match fingerprints from those bombs to the fingerprints of individuals who had recently entered the United States as refugees:

An intelligence tip initially led the FBI to Waad Ramadan Alwan, 32, in 2009. The Iraqi had claimed to be a refugee who faced persecution back home — a story that shattered when the FBI found his fingerprints on a cordless phone base that U.S. soldiers dug up in a gravel pile south of Bayji, Iraq on Sept. 1, 2005. The phone base had been wired to unexploded bombs buried in a nearby road.

 

An ABC News investigation of the flawed U.S. refugee screening system, which was overhauled two years ago, showed that Alwan was mistakenly allowed into the U.S. and resettled in the leafy southern town of Bowling Green, Kentucky, a city of 60,000 which is home to Western Kentucky University and near the Army’s Fort Knox and Fort Campbell. Alwan and another Iraqi refugee, Mohanad Shareef Hammadi, 26, were resettled in Bowling Green even though both had been detained during the war by Iraqi authorities, according to federal prosecutors.

The terrorists were not taken into custody until 2011. Shortly thereafter, the U.S. State Department stopped processing refugee requests from Iraqis for six months in order to review and revamp security screening procedures:

As a result of the Kentucky case, the State Department stopped processing Iraq refugees for six months in 2011, federal officials told ABC News – even for many who had heroically helped U.S. forces as interpreters and intelligence assets. One Iraqi who had aided American troops was assassinated before his refugee application could be processed, because of the immigration delays, two U.S. officials said. In 2011, fewer than 10,000 Iraqis were resettled as refugees in the U.S., half the number from the year before, State Department statistics show.

According to a 2013 report from ABC News, at least one of the Kentucky terrorists passed background and fingerprint checks conducted by the Department of Homeland Security prior to being allowed to enter the United States. Without the fingerprint evidence taken from roadside bombs, which one federal forensic scientist referred to as “a needle in the haystack,” it is unlikely that the two terrorists would ever have been identified and apprehended.

“How did a person who we detained in Iraq — linked to an IED attack, we had his fingerprints in our government system — how did he walk into America in 2009?” asked one former Army general who previously oversaw the U.S. military’s anti-IED efforts.

Obama has also still refused to explain how his administration’s security-related pause on processing Iraq refugee requests in 2011 did not “betray our deepest values.”

Of course, we are also sure that this is an entirely different situation to what President Trump has enacted.

*  *  *

And for those wondering why President Trump chose those seven nations? Simple – because President Obama had already enacted travel restrictions on those same nations…

The Department of Homeland Security today announced that it is continuing its implementation of the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015 with the addition of Libya, Somalia, and Yemen as three countries of concern, limiting Visa Waiver Program travel for certain individuals who have traveled to these countries.

 

Pursuant to the Act, the Secretary of Homeland Security had sixty days to determine whether additional countries or areas of concern should be subject to the travel or dual nationality restrictions under the Act. After careful consideration, and in consultation with the Director of National Intelligence and the Secretary of State, the Secretary of Homeland Security has determined that Libya, Somalia, and Yemen be included as countries of concern, specifically for individuals who have traveled to these countries since March 1, 2011. At this time, the restriction on Visa Waiver Program travel will not apply to dual nationals of these three countries. DHS continues to consult with the Department of State and the Office of the Director of National Intelligence to develop further criteria to determine whether other countries would be added to this list.

 

Last month, the United States began implementing changes under the Act. The three additional countries designated today join Iran, Iraq, Sudan and Syria as countries subject to restrictions for Visa Waiver Program travel for certain individuals. Under the new law, the Secretary of Homeland Security may waive these restrictions if he determines that such a waiver is in the law enforcement or national security interests of the United States. Such waivers will be granted only on a case-by-case basis. As a general matter, categories of travelers who may be eligible for a waiver include individuals who traveled to these countries on behalf of international organizations, regional organizations, and sub-national governments on official duty; on behalf of a humanitarian NGO on official duty; or as a journalist for reporting purposes.

 

The addition of these three countries is indicative of the Department’s continued focus on the threat of foreign fighters. DHS continues to review the security of the Visa Waiver Program, the threat environment, and potential vulnerabilities. This is the latest step in a series of actions over the past 15 months to strengthen the security of the Visa Waiver Program and ensure the Program’s requirements are commensurate with the growing threat from foreign terrorist fighters, many of whom are nationals of Visa Waiver Program countries.

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…it’s a start!

 

Source: Townhall.com

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Submitted by Jeffrey Snider via Alhambra Investment Partners,

Like it or not, this is where we have been all along and a great many people are just now catching up. No matter what Janet Yellen says about the economy, she is talking out the side of her mouth. Internally, the recovery is gone, and it is never coming back. Externally, we have sub-5% unemployment so we all should be so happy, especially with, in her view, stable prices.

To their credit, many prominent economists aren’t so enthusiastic about those prospects. Among them are Larry Summers, Paul Krugman, and Brad DeLong, all who recognize that “something” just isn’t right and therefore “something” else should be done about it. Thus, the real economic debate over the coming years (unfortunately) will take shape around those two facets. Having wasted nearly a decade on purely central bank solutions that were never going to work, the real discoveries can now possibly take place.

The problem is as I wrote yesterday, in a rush to do anything and everything “different” the Trump administration might actually spoil the process. De-regulation and income tax cuts, as well as the repeal of Obamacare, are all very good things that sorely need to be addressed; but they didn’t cause this depression and thus won’t get us out of it. And you can bet that none of Summers, Krugman, or DeLong will be in favor of those options, so if they all fail to restore economic growth, as I believe they will if left in isolation, then that will severely diminish those ideas for perhaps a generation or more. That would be a fatal mistake, especially since for the first time in many generations people outside of Economics are receptive to “new” ideas (that are only new because they have been out of practice and actively discouraged for so long).

Krugman actually described our predicament very well all the way back in 1999. Observing the Japanese fall into these very same conditions (it’s always the Japanese first because their lost decade then has become our lost decade now), he wrote at MIT:

Now you could argue that the experience of the Depression and after provides just such evidence. Many economists thought that with the end of World War II spending the United States would revert to Depression-type conditions; a whole school of thought, the “secular stagnation” hypothesis, was built around that idea. In fact, once jolted out of depression, the U.S. did not fall back.

This has led many economists to believe that World War II was the answer to “secular stagnation” the first. In orthodox parlance, Krugman describes it as an S-curve with multiple equilibria, being careful to pronounce such analysis as dangerous because such a model would be, “a device that can justify practically any policy.” Even still, that is exactly how not just the US economy but the world economy acted in the 1940’s.

Thus, the secret would be to identify the event or cause by which the global economy was jolted and to use it as a matter of policy today. For Krugman, he of fake alien invasion fantasies, it was the government spending over WWII that did the trick. Therefore, governments in the 2010’s should be doing something similar in terms of size and depth, as well as sustaining those efforts for as long as it takes. This is why he embraced the idea of the ARRA as well as Abenomics, as both in their respective times seemed to be of sufficient size and duration so as to perform this “shock” into the higher order equilibria.

Not so fast, claimed Larry Summers. Writing in November 2015 when secular stagnation really started to catch on as QE-love faded fast, Summers points to the major flaw:

Paul studies an economy in liquidity trap that will, by deus ex machina, be lifted out at some point in the future. He makes the point that if you assume sufficiently inflationary policy after this point, you can drive ex ante real rates down enough to stimulate the economy even before the deus ex machina moment.

 

This is true and an important insight. But it seems to elide the main issue. Where is the deus ex machina? Where is the can opener? The essence of the secular stagnation and hysteresis ideas that I have been pushing is that there is no assurance that capitalist economies, when plunged into downturn, will over any interval revert to what had been normal. Understanding this phenomenon and responding to it seems the central challenge for macroeconomics in this era.

And so one of the primary routes of investigation over the past year or so has to been to further identify that deus ex machina without seeing it as such; “government spending” is far too general to be a useful guide. Some have proposed that the central bank should instead target a higher inflation rate, even 4% rather than 2%, but as much as that might satisfy some orthodox requirements economists are still left with “how would that work?” especially as central banking is on the wane for good reason.

The common theme for all these, and others that I have left out, is for some official agency, be it government or central bank, to be highly and hugely disruptive. All these “solutions” now finally and properly looking at the problem (depression) are based around the “shock.” The WWII thesis was of similar construction and belief, that disruption can be a positive force if only because of an existing negative mindset.

That, however, is not how this works. It is such a dark take on a capitalist economy, that once one falls down economists so often believe it will never get back up again without their assistance. And in the case of falling down, it never seems to occur that the cause of that fall was already some other disruption, so that further disruption might not actually be a good idea. Instead, greater disturbance might itself be the very cause of the dark mindset that economists attribute now to this supposed dark side of capitalism; or, as Krugman’s 1999 book was titled, in part, Depression Economics.

They are using a twisted sense of humanity and commercial liberty to justify why an economy needs to be further disturbed even if there is or can be no general agreement as to what or why that is. Summers was absolutely correct, as what they are all searching for is a deus ex machina, a derisive term from literature that smacks an author for lack of originality or insight. Thus is the state of Economics.

From a more positive view of capitalism, actual capitalism practiced without the heavy influence of especially central banks seeking to control prices and now markets, disruption is always a negative imposition. The primary goal of any policy is to seek out and assure stability. There were no redeeming qualities about WWII (the war itself, not our victory in it) let alone any that might be economic in nature. You can’t get ahead by destroying so much, no matter how shocking the process or the depression before it.

Instead, it would be more consistent that the global economy was positively “shocked” not by the spending actions to take out global conflagration but the re-imposition at long last of (more) honest monetary conditions. Bretton Woods took place in 1944, but will always be ignored by economists like Krugman and Summers because honest money is anathema to Economists who wish to be able to disrupt at their whim. Equating and soundly defining global monetary terms, for however brief (just 16 years), is a legitimate candidate for explaining in Krugman’s S-curve how the global economy skipped from the hugely costly equilibrium in depression to the utterly positive robust growth equilibrium that brought us, in good part, the Baby Boomers.

Is it really a mystery as to why an economy that is repeatedly intruded upon with some of the worst negative factors just won’t grow? Why any rational human would believe that a positive and sustained growth period could be created by “shocking” levels of negativity is itself a legitimate question. If you despise sound money because it would deny your place in the political order, WWII, in twisted fashion, looks really good as an alternate explanation.

Because of that, economists and Economists alike will never be able to find a “shock” big enough with which to push the US economy to that second equilibrim; they proceed under false assumptions and now others are doing it again (Trump “stimulus”). The greatest of these is beyond stable money to what constitutes money itself. As I wrote on the topic of secular stagnation in June last year:

Contrary to the core assertion of this view of secular stagnation, there was indeed another innovative revolution that altered the entire world trajectory; only it was far more nefarious and misunderstood by economists, in particular, who had decided, while this revolution was occurring, they had learned everything worth knowing. One of the few great ironies of secular stagnation that is somehow comforting if still also infuriating is that the eurodollar standard, the world’s true reserve currency this last half century or so, will likely end before anyone even knows it was there. That includes all the world’s monetary experts.

More harmful than all the world’s monetary policy disruptions (more so on expectations than in actual money), all of increasing sizes and doses, has been the far larger and more relevant “dollar” impositions. Stop the “dollar” and there will no longer be any need for intentional disruptions of further negative factors (either more inflation or the utter waste of government spending). Business can go back to the business of business, as it is supposed to be, rather than being concerned about the “rising dollar”, the falling dollar, or whatever else some economist might think up to fill in as a deus ex machina in the absence of monetary competence.

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An online petition to prevent US President Donald Trump making an official state visit to the UK has generated enough signatures to warrant it being considered for debate in British parliament.

The petition was initially opened in the immediate aftermath of Trump’s election in November 2016 but, as RT reports, following Trump’s ‘Muslim ban’ executive order on Friday, it has garnered huge support online.

“Donald Trump should be allowed to enter the UK in his capacity as head of the US Government, but he should not be invited to make an official State Visit because it would cause embarrassment to Her Majesty the Queen,” the petition states.

The petition also precludes President Trump from meeting with The Prince of Wales in any official capacity:

“Donald Trump’s well documented misogyny and vulgarity disqualifies him from being received by Her Majesty the Queen or the Prince of Wales. Therefore during the term of his presidency Donald Trump should not be invited to the United Kingdom for an official State Visit.”

British Labour Party leader Jeremy Corbyn tweeted the petition just after midday on January 29:

.@Theresa_May would be failing the British people if she does not postpone the state visit & condemn Trump’s actions in the clearest terms

— Jeremy Corbyn MP (@jeremycorbyn) January 29, 2017

And since then the petition’s signatories has exploded well beyond the 100,000 required to trigger a parliamentary debate.

Interestingly, as the petition grew larger, Bloomberg reports, U.K. Prime Minister Theresa May broke her silence over President Donald Trump’s U.S. immigration ban on Muslim-majority nations, saying she does not agree with the approach.

Shortly after May returned to Britain from a visit to Turkey, her office acted to quell the backlash, saying Britain will “make representations” to the U.S. government if the ban hits British citizens.

 

“Immigration policy in the United States is a matter for the government of the United States, just the same as immigration policy for this country should be set by our government,” a spokesman said in a statement.

 

“But we do not agree with this kind of approach and it is not one we will be taking. We are studying this new executive order to see what it means and what the legal effects are, and in particular what the consequences are for U.K. nationals.”

A spokesperson for Number 10 said on Sunday that Trump would still be invited to visit the UK later this year as planned.

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"I don't buy it at all" exclaims Gluskin Sheff's David Rosenberg in a recent interview with MacroVoices.com, "look all I'll say is that in 2009, 2010 when the Fed embarked on QE, along with 0% interest rates every Tom, Dick and Harry portfolio manager and bond market pundit out there was screaming about the end of the secular bull market in bonds," and they were all wrong.

Submitted by Patrick Ceresna via Macrovoices.com,

• Bill Gross recently said if we cross above 2.6% based on the thickness of this pencil that marks the end of the bull market, I don't look at it that way. I look at it that when you take a look at a 10 year note or you look at the long bond for that matter in each cycle the highs in yield are getting lower and the lows are getting lower. The highs are getting lower and the lows are getting lower. And so, we have to wait and see how far this thing goes. I would think that to really call for the secular bull market to be over I think we have to cross well over 4% and we're not gonna get anywhere close to that in my opinion.
• This is about the 8^th time we had a backup of this magnitude in the past decade. They come and they go. I just think that there's still too many powerful sector of forces at play. Global competitive pressures, aging demographics in the industrialized world. And we just have too much debt globally to withstand rises in the market rates much more than we already have done.
• You just start to wonder what happens when things start to unravel because there will be recession at some point. I'll say this right now it's a guarantee that we'll have recession at some point because the business cycle is not dead, we can debate as to what year that happens but here's what we know, we know that bond yields make new lows in recessions and we know that there's gonna be recession at some point and the most you can do right now at the peak of the cycle is 2.60% on the 10-year note really tell you something. So no, I'm not really buying in. Notwithstanding the fact that bond yields are trading higher that could happen again for the next several months, it wouldn't surprise me, will it be sustained? And my answer is an emphatic no.

Excerpts:

Erik:       I'm personally convinced that the 64 trillion-dollar question for 2017 is whether or not the 35-year bond bull market really is over the way Jeff Gundlach has suggested? Gundlach like he said we're headed back to 6 percent yields and personally I can't figure out how you get back to 6 percent 10 year yields without the US government going broke trying to service its debt. So, what do you see for the bond market? Do you buy the story that the secular bull market could be over in bonds and if so what does that mean in terms of what's next?

Dave:    I don't buy it at all and look all I'll say is that in 2009, 2010 when the Fed embarked on QE, along with 0% interest rates every Tom, Dick and Harry portfolio manager and bond market pundit out there was screaming about the end of the secular bull market in bonds. This is just basically, I mean you're going back 6 or 7 years. I remember my former firm coming out with published reports talking about the great rotation from bonds and into stocks. Stocks certainly did pretty well in the cycle but it wasn't because it was fuelled by retail inflows of the bonds and the stocks. We know that, that didn't happen from a fund flow perspective. And so, the bond bears have been wrong all along and I think they'll continue to be wrong until we actually see sustained, above trend GDP growth that eliminates the global output gap, and I think that that is still some time away. So, look I think that people out there entitle their opinions. Bill Gross recently said if we cross above 2.6% based on the thickness of this pencil that marks the end of the bull market, I don't look at it that way. I look at it that when you take a look at a 10 year note or you look at the long bond for that matter in each cycle the highs in yield are getting lower and the lows are getting lower. The highs are getting lower and the lows are getting lower. And so, we have to wait and see how far this thing goes. I would think that to really call for the secular bull market to be over I think we have to cross well over 4% and we're not gonna get anywhere close to that in my opinion.

And in fact, if you take a look everything happening right now, we had a hundred-basis point back up in the 10 year note from where it was in July, that much is true, but I mean come on, in July deflation was dripping off everybody's tongue. We had Europe and Japan going towards negative rates. We didn't know how BREXIT was going to lead to a recession not just here but bring the EU into a recession as well, that was the mindset at that time. So, I mean at that point you had 40 year of JGBs at 0%, US 10-year treasuries at call it one thirty-five. So, we backed up since then over a hundred bases points that much is true.  

This is about the 8^th time we had a backup of this magnitude in the past decade. They come and they go. I just think that there's still too many powerful sector of forces at play. Global competitive pressures, aging demographics in the industrialized world. And we just have too much debt globally to withstand rises in the market rates much more than we already have done. And then I look back and I say DOW 20,000 stock markets melting up, the VIX below 11, 15-year high valuations in the stock market, commodities ripping, oil doubling over the past year, and I look at the 10-year note at the call it 2.5% and I can only say– that's all you get for your money? I mean even if we go to 2.75% or 3%, seriously, considering everything that's happening out there all the inflationary mindset of practically everybody talking on bubble-vision and everything that you read in the newspapers and this is all that you can really do is 2.50-2.60 in a 10-year note? You just start to wonder what happens when things start to unravel because there will be recession at some point.

I'll say this right now it's a guarantee that we'll have recession at some point because the business cycle is not dead, we can debate as to what year that happens but here's what we know, we know that bond yields make new lows in recessions and we know that there's gonna be recession at some point and the most you can do right now at the peak of the cycle is 2.60% on the 10-year note really tell you something. So no, I'm not really buying in.

Notwithstanding the fact that bond yields are trading higher that could happen again for the next several months, it wouldn't surprise me, will it be sustained? And my answer is an emphatic no.

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By EconMatters

We discuss the entire complex from wheat, corn and soybeans to meats, lean hogs and milk, to orange juice, sugar, coffee and lumber in this market analysis video. Lumber and Cotton Markets stood out the most for me in this comprehensive analysis.

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As President Trump’s executive orders ripple through the spin and propaganda strata of social- and mainstream-media channels, we thought a look at who the biggest ‘givers’ and ‘receivers’ of immigrants are in the world…

You will find more statistics at Statista

According to United Nations data, there are 243 million international migrants scattered across the world, accounting for 3.4 percent of the global population.

The United States hosts the most of the them as of 2015 – some 46.6 million people. Germany comes second with 12 million while Russia rounds off the top three with 11.6 million. In terms of sending countries, India is in first place with 15.6 million.

Perhaps ironically, The United Kingdom, which is set to adopt stricter immigration controls, is one of the top-10 countries worldwide for sending migrants. In 2015, approximately 4.9 million British citizens lived in other countries.

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By Vitaliy Katsenelson 

This a new year, and my crystal ball was supposed to have become magically unfogged by the turn of the calendar. Well, I hate to disappoint you, but it hasn’t. Unlike our new president, I lack certitude about the brightness of our future.

My thinking is caught between two quotations from Mark Twain. The first is, “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” And the second: “I’ve lived through some terrible things in my life, some of which actually happened.”

On one side I am in agreement with the majority who expect Trump’s policies to benefit the economy: lower corporate taxes, foreign corporate cash repatriation, deregulation, and so on. This inclines me to pause and reflect, not just because I find myself in the innately uncomfortable position of agreeing with the majority but because these in-your-face positives are only part of the new president’s package.

Trump’s ascendancy also brings a lot of uncertainty – something the market is ignoring, for now. The business-oriented pragmatism that it loves today comes with nationalistic and protectionist “job creation” rhetoric that may result in trade (or even conventional) wars. U.S. foreign policy, trade, and military alliances that have been in place since World War II are being questioned by the new president.

In addition, Trump has been elected at a time when the U.S. economy is quite levered. His “growth” policies will likely bring higher interest rates, which are both positive and negative for the consumer – they help savers and punish spenders. Higher interest rates would most likely be a net negative for corporations, whose average debt load has doubled since the financial crisis. And finally, higher interest rates will be a negative for the government, whose interest expense in 2016 was at the same level as in 2007, despite the debt load almost doubling. Thank you, low interest rates!

This is when we start thinking of Twain’s second insight and remind ourselves that we worry too much. Trump was not elected king or dictator in a lawless banana republic. He is the U.S. president, and when it comes to domestic policy, his powers are limited by the Constitution, which includes plenty of checks and balances.

The Constitution grants the president a lot more power in his role as commander-in-chief, with fewer checks and balances. But now we should remember that Trump has kids and grandkids and owns a lot of shiny buildings with his name on them in this and other countries. In other words, he has a lot of vested interests that he really wants to keep intact during and beyond his presidency. Think of it this way: The U.S. is a large boat, and Trump has a very large room (a gold-plated penthouse) on this boat. Instead of worrying about his conflicts of interest, we should embrace them  –  they are a guarantee that his foreign policy, though it may be different from that of his predecessors and may therefore create uncertainty and volatility in the interim, will not sink this boat, since he would go down with it. (This brings to mind another of Twain’s adages: “Prosperity is the best protector of principle.”)

Of course there is an easy counterargument to be made: If Trump screws up, starts a trade war, and plunges America into a recession, his net worth may decline – let’s say from $3 billion to $1 billion – but he will remain a rich man and his lifestyle will not change one iota. That is absolutely true. In theory, you’d think people who still had $1 billion would feel proportionately less pain than the average Joe whose stock portfolio fell from $300,000 to $100,000 and suddenly he can’t retire. I can’t speak for every billionaire, but Donald Trump would be devastated, as he cares deeply about his net worth and rank on the Forbes 400 list.

Uncertainty does lead to more volatility. We don’t, however, equate uncertainty with risk. This point is very important. Uncertainty equates to risk under only two circumstances: first, if your investment time horizon is not long enough to wait out an asset’s reversion to its fair value. For instance, if you have to write a check for your daughter’s wedding in two days and your portfolio is down 30 percent, then volatility and risk are one and the same, since your sale will result in a permanent loss of capital.

The second circumstance is when volatility is your master and not the other way around. If you have done your research and believe a stock is worth $10, and the market prices it today at $4, you should celebrate and praise the gods of volatility for their gracious gift. Unfortunately, you need to have done the work to know what the company is worth, but this research would have given you the confidence to buy when most investors are hiding under their desks.

On this point I find myself thinking not of Mark Twain but of another eminently quotable sage – Yoda. As he might have put it, “Embracing volatility we are.”

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley) and The Little Book of Sideways Markets (Wiley).  

Forbes Magazine called him “The new Benjamin Graham”.   To receive Vitaliy’s future articles by email or read his articles click here.

originally written for Institutional Investor Magazine 

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