Month: May 2017

5/28/2017 – (GLOBALINTELHUB)– Ever since JFK the word ‘conspiracy theory’ has been used to discredit anyone holding a non-conventional view, such as based on facts regarding the CIA’s role in providing security at Area 51 (and the point being, what are they doing there?).  But since the Trump election ‘conspiracy theorists’ like Alex Jones have been thrust to the forefront of the mainstream information curve.

It seems now the Democrats will stop at nothing to create their own ‘fake news’ and ‘conspiracies’ to destroy the fairly elected Donald Trump.  But many of us remember it was recently Republicans creating ‘vast right wing conspiracies’ about leading Democrats.  The fact is, there is little difference between the two parties, they are both funded by the same sponsors.  This groundbreaking documentary explains how the world really works from the ground up; the tools used to manipulate the population into blind submission.  This is a must watch – but bear in mind a few tidbits;

• JFK as an event is completely irrelevant today; however – as it was so deep in the past, it’s possible to analyze it better than more recent events like 911 (even though there is less forensic evidence).  It isn’t just for history buffs, it explains how the world ‘really’ works.  In the case of FX, it shows the simple path leading Nixon to office and finally the creation of a free floating FX regime.  (THINK:  If JFK survived, would we have FX?)
• The tools built by the military industrial complex post World War 2 have evolved only in technology, they are using the same bag of tricks.  Thus, by understanding how this game works, we can better understand what’s going on today, whether it be how to improve your business, your finances, your portfolio, or understanding of the upside down pyramid structure that runs the world.

 

 

Importantly, the CIA has been engaged in the conspiracy mill in foreign countries for years.  Part of winning any war, is first winning an information war.  But this strategy was used in a domestic political election, clearly a violation of their mandate.  And, logically – if they will violate their mandate once it is logical to assume they would for any other reason they deem necessary.  Or who knows what lengths they may go through to justify their power and expanding budgets (i.e. Project Blue Beam).

Message for traders/investors: If you understand how significant events like 911 were rigged, as large scale Hollywood productions, you can understand how markets are rigged, and thus – see things for what they really are.

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By Emily Jashinky, originally in the Washingtonm Examiner,

Camille Paglia is much more worried about the media than about the steady string of Trump-related scandals they claim to be uncovering.

In a Tuesday interview with the Washington Examiner, Paglia excoriated the press for its coverage of Trump's decision to fire FBI Director James Comey and his alleged sharing of classified information with Russian officials.

Fresh off a spirited panel with Christina Hoff Sommers hosted by the Independent Women's Forum, the iconic feminist dissident, who serves as a professor of media studies at the University of the Arts, accused journalists of colluding with the Democratic Party in an effort to damage the Trump administration.

"Democrats are doing this in collusion with the media obviously, because they just want to create chaos," she said when asked to comment on the aforementioned stories.

 

"They want to completely obliterate any sense that the Trump administration is making any progress on anything."

The popular author, whose latest book was released in March, pointed to early struggles experienced by previous presidential administrations to illustrate the media's bias against Trump. "Obama's administration for the first six months was chaos," Paglia recalled. "Bill Clinton's was chaos for six months. Nobody holds that against a new person."

"Those two guys had actually been politicians!" she continued, noting Trump's relative inexperience with government operations.

Paglia's assessment of media bias in the Trump era leaves little room for optimism.

"I am appalled at the behavior of the media," she declared. "It's the collapse of journalism."

As the Examiner reported in April, Paglia, who cast her ballot for Jill Stein last November, is predicting Trump will win re-election in 2020.

"I feel like the Democrats have overplayed their hand," she said at the time.

Though the news cycle has moved through plenty of additional scandals in the past month, it appears as though Paglia's assessment of the president's prospects has not changed.

"I'm looking forward to voting Democrat again," the acclaimed philosopher explained. "But the point is I feel that the media has so utterly lost its credibility that I think people are going to vote against the media again."

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The effects of China's rules-change proposals around the Yuan Fix are already starting to show in the FX, money markets as one-week funding costs have exploded to the annualized equivalent of 14%…

As a reminder, we reported late last week that China announced it would introduce a new "counter-cyclical factor" to reduce exchange-rate volatility while undermining efforts to increase the role of market forces. In some ways this announcement was not unexpected: recall that after a period of eerie stability, on Thursday the Yuan surged shortly after China's downgrade by Moody's, which prompted speculation that the central bank was directly manipulating the currency as the PBOC’s daily fixings had "materially diverged" from the prescribed formula, resulting in a gap between the reference rate and currency’s spot value.

Roughly at the same time as a similar move was taking place on Friday, Bloomberg first reported and China later confirmed that policy makers would add a “counter-cyclical factor” to the yuan’s daily fixing, a move which "would give authorities more control over the fixing and restrain the influence of market pricing." Subsequent detailed revealed that authorities would change the daily $/CNY fixing mechanism, so that the change of the fixing from the previous day’s close would also take into account a “counter-cyclical  adjustment factor” (how this is determined is not specified though), in addition to the USD’s movement against a basket of currencies.

While the practical consequence was a surge in both the onshore and offshore Yuan to three month highs, traders and commentators were left confused by this latest intervention by Beijing into what has become China's fulcrum security.

“The counter-cyclical adjustment factor sounds like an increased role for the fixing to be nudged away from where markets would set it,” Sean Callow of Westpac Banking Corp told Bloomberg. “The authorities’ actions give the impression that they are more worried about yuan stability than declared in their public statements.”

The reaction has been notable…

Offshore Yuan has spiked dramatically in the last few days – coinciding with apparent Fed dovishness in the minutes and PBOC rule changes…

 

And, as Bloomberg details, deliverable yuan funding costs have soared after the PBOC said it’s considering changing the way it calculates the yuan daily reference rate. One-week forward points have more than doubled to the equivalent of about a 14 percent annualized interest rate.

Though traders anticipate that funding costs will retreat after month-end, a policy shift may keep markets on edge — on two previous occasions the PBOC adjusted its fixing mechanism, in 2015 and earlier in 2017, costs remained elevated for weeks.

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Authored by Michael Snyder via The Economic Collapse blog,

After eight long, bitter years under Obama, will things go better for entrepreneurs and small businesses now that Donald Trump is in the White House?

Once upon a time, America was the best place in the world for those that wanted to work for themselves.  Our free market capitalist system created an environment in which entrepreneurs and small businesses greatly thrived, but today they are being absolutely eviscerated by the control freak bureaucrats that dominate our political system.  Year after year, leftist politicians just keep piling on more rules, more regulations, more red tape and more taxes.  As a result, the number of self-employed Americans is now lower than it was in 1990…

In April 1990, 8.7 million Americans were self-employed, but today only 8.4 million Americans are self-employed.

Of course our population has grown much, much larger since that time.  In 1990, there were 249 million people living in the United States, but today there are 321 million people living in this country.

What this means is that the percentage of the population that is self-employed is way down.

In fact, one study found that the percentage of Americans that are self-employed fell by more than 20 percent between 1991 and 2010.

And if you go back even farther, the numbers are even more depressing.  It may be hard to believe, but the percentage of “new entrepreneurs and business owners” declined by a staggering 53 percent between 1977 and 2010.

Sometimes I like to watch a television show called Shark Tank, and on that show they make it seem like entrepreneurship in America is thriving.

But the exact opposite is actually the case.  In a previous article, I discussed how the number of new businesses being created in the United States has been steadily falling over the years.  According to economist Tim Kane, the number of startup jobs per one thousand Americans has been declining for several consecutive presidential administrations…

• Bush Sr.: 11.3
• Clinton: 11.2
• Bush Jr.: 10.8
• Obama: 7.8

So why is this happening?

As I mentioned at the top of this article, self-employed Americans are being absolutely strangled by oppressive rules, regulations and taxes.

To illustrate this point, I would like to share with you some quotes from an open letter that was authored by a small business owner named Don Chernoff…

#1 I work for myself and have to pay my own medical expenses. Before the “affordable care act” I was paying about $200 per month for a high deductible policy. It was far from perfect but it got so much worse under the “Affordable” care act.

 

I now pay over $400 a month, my deductible went from $5,000 to over $6,000 and my out of pocket costs for care have skyrocketed.

 

#2 I have to spend dozens of hours and thousands of dollars for a tax accountant each spring to prepare my taxes because I cannot possibly understand how to do it myself, and I have a master’s degree in engineering.

 

#3 Many years ago when I quit a perfectly good job to start my own small business, I was shocked to learn that I had to pay both my share and what had been my employer’s share of Social Security.

 

#4 Between state, federal and local taxes you’ve probably paid 50% or more of your income in taxes, but that’s not enough for politicians.

 

If you’ve been lucky enough to have created a business you can sell, now you’ll get to enjoy paying another tax on the capital gain from the sale.

This is another reason why we need a conservative revolution in Washington.  We should demand that our members of Congress lower tax rates dramatically, completely eliminate the self-employment tax, greatly simplify the tax code and get rid of as many regulations on small business owners as possible.

In fact, if it was up to me I would abolish a number of federal agencies completely.

What we are doing right now is not working.  Small businesses have traditionally been one of the main engines of economic growth in this country, but thanks to the left they are unable to play that role at the moment.

It isn’t an accident that over the last ten years the U.S. economy has grown at exactly the same rate as it did during the 1930s.

If we want our economy to be great again, we need to go back and start doing the things that made it great in the first place.  If we continue to suffocate our economy, we will continue to get the same results.

And with each passing day, we get more signs that the economy is heading into another major downturn.  For instance, we just learned that Sears is closing 30 more stores on top of the 150 that had already been announced…

Sears Holdings, which wasn’t shy when it announced at the start of the year that it is closing 150 underperforming stores, has quietly added at least 30 more to the list.

 

Another 12 Sears stores and 18 Kmarts are among the locations that are closing, from Carson, Calif., to Hialeah, Fla., with most scheduled to shut their doors in July, based on calls to the stores, malls and confirmation in local media.

 

At the start of the year, the retailer pinpointed the 150 stores it said it would close. But it declined this week to provide a list of additional locations that are slated to shut since then, saying that it update store counts each quarter.

In addition, we just learned that new home sales in April were 11.4 percent lower than they were in March…

If you’re surprised by the collapse in new home sales in April, then you’re not paying attention.

 

The 11.4% MoM plunge in new home sales in April was 5 standard deviations below expectations and the biggest since March 2015.

Yes, the stock market is holding up for the moment, but for most Americans the “real economy” just continues to deteriorate.  Just because we are at the end of a giant financial bubble does not mean that everything is going to be okay.

The numbers that I brought up in this article are just another example of our long-term economic decline.  In a healthy economy, entrepreneurs and small businesses would be thriving.  But instead, they are being systematically strangled out of existence by a political system that is wildly out of control.

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Iran signed an agreement with Russia under which it has broken free from the petrodollar, and will “sell”, or rather barter crude oil to Russia in exchange for products. The announcement was made by Iran’s Oil Minister Bijan Zanganeh, as reported by Russia’s RIA and TASS news agencies.

“The deal has been concluded. We are just waiting for the implementation from the Russian side. We have no difficulties; we signed the contract, everything is coordinated between the parties. We are waiting for Russian oil companies to send tankers,” he said, as quoted by Russian news agencies. While sanctions against Iran have been lifted, restrictions on trade in US dollars for the country’s banks remain, making it difficult to sell oil on the open market.

As reported here just over three years ago, the $20 billion agreement was initially signed in April 2014 when Iran was under Western sanctions over its nuclear program. Russian traders were to participate in the selling of Iranian oil. In exchange, Iran wanted essential goods and technology from Russia.

This is what Reuters reported in April 2014 when the deal was first announced:

Iran and Russia have made progress towards an oil-for-goods deal sources said would be worth up to $20 billion, which would enable Tehran to boost vital energy exports in defiance of Western sanctions, people familiar with the negotiations told Reuters.

 

In January Reuters reported Moscow and Tehran were discussing a barter deal that would see Moscow buy up to 500,000 barrels a day of Iranian oil in exchange for Russian equipment and goods.

 

The White House has said such a deal would raise “serious concerns” and would be inconsistent with the nuclear talks between world powers and Iran.

Little did the US know back in 2014 that less than three years later, Russia would also be running the US, courtesy of wholesale manipulation of tens of millions of Americans, whom it hacked and convinced to vote for Trump.

Sarcasm aside, when the sanctions against Tehran were lifted in 2016, Russian Energy Minister Alexander Novak said the deal was no longer necessary. However, Novak said in March 2017 that the plan was back on the table with Russia buying 100,000 barrels per day from Iran and selling the country $45 billion worth of goods, Russia Today reported.

Russia and Iran discussed energy, electricity, nuclear energy, gas and oil, as well as cooperation in the field of railways, industry, and agriculture.

Novak had announced in February that Russia’s state trading enterprise Promsirieimport has been authorized by the government to carry out the purchase of Iran’s oil through the oil-for-goods program under study by both countries. Meanwhile, Zanganeh had been quoted by the media as saying that Iran would be paid in cash for half of the oil that would be sold to Russia.  The due payments for the remaining half would be made in goods and services, the Iranian minister had said. 

A February report by the International Monetary Fund said that while Iran has been reconnected to SWIFT, significant challenges prevent Iranian banks fully-reconnecting to global banks still exist mostly due to remaining US sanctions.

“US primary sanctions apply to US financial institutions and companies, including their non-US branches (but not their subsidiaries). Moreover, with very limited exceptions, businesses and individuals related to the US continue to be generally prohibited from dealing with Iran, including with the government,” the IMF said.

“US dollar clearing restrictions have not been lifted and pose a significant challenge for non-US banks who may do business with Iran, but may not be paid in US dollars,” it added.

And since necessity is the mother of invention, what better way to bypass the world’s reserve currency than to go back to the way commerce was conducted before currencies were even created: through barter.

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Authored by Kaitlin Last via BetterDwelling.com,

The price of new homes is quickly diverging in Canada and the US.

 Data from the Canadian Housing and Mortgage Corporation (CMHC) show that new homes are selling for substantially more than the same time last year.

 

Meanwhile south of the border, data from the US Bureau of Census show that new home prices are on the decline.

This has lead to an even wider gap between the average price of a new home in Canada and the US.

Canadian New Construction Is Higher

The price of a new home across Canada is up for the second month in a row. The average sale price in April was CA$751,881 (US$559,123). This represents an 11% increase from the same time last year, when measured in Canadian dollars. When compared in US dollars, that increase drops to a much more conservative 2.64%. Even after factoring in the loonie’s decreased buying power in Canada, new home prices still climbed.

US New Construction Is Lower

American new home builders aren’t seeing such steep climbs in sale prices. Actually, they aren’t seeing climbs at all. The average price of a new home in the US was CA$495,271 (US$368,300). This represents a 3% decline from the same time last year, when measured in US dollars. In Canadian dollars, this was a 0.49% decline from the same time last year. Both forms of measurement show declining home prices in the US, curious since their economy is in a much better state than Canada right now.

US Vs. Canadian Prices

New homes are trading at substantially higher values in Canada than the US in April. The average new home in April 2017 was 51% higher in Canada than the US. The same time last year, prices in Canada were only 36% higher. It appears in a post-crash United States, new home buyers are taking much more conservative strides. In a hasn’t-crashed-in-decades Canada, new home buyers are optimistic about future values.

The gap between new home sale prices in Canada and the US is growing substantially. The US is a country with a booming economy, almost 10 times the population of Canada, and less land mass. Somehow, new home prices in the US are dropping compared to the same time last year. In sparsely populated Canada, prices are increasing – despite the precarious position of our economy.

Are Americans being overly cautious on homeownership, or are Canadians demonstrating irrational exuberance for homeownership, much like the US did in a pre-2006 America? Tell us your thoughts in the comments.

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Submitted by Nicholas Colas of Convergex

Millennials save more of their income than older generations. Don’t believe it? Look at a recent survey by Merrill Edge, which found millennials say they save 36% more than their general population counterparts report as over a third stash away more than 20% of their salary per year.

As for what they’re saving for, that’s another story. Whereas baby boomers save for retirement, millennials want financial freedom and save for a desired lifestyle rather than exiting the workforce. Millennials would rather spend money on travel, dining, and fitness than save for their financial future. They are also more focused on certain milestones like landing their dream job or traveling the world, and are less worried about getting married or having kids. Bottom line, millennials are saving, just for shorter-term goals as compared to their parents.

Where were you thirty years ago? My parents and many of our readers likely remember the stock market’s ascension to record highs before the sudden crash of 1987. A few decades later the capital market is back to flirting with another peak, but the loss-averse nature of people leaves past financial crises clearly imprinted into memory.

The Atlantic put together 41 pictures for a glimpse into 1987 that captured a wide variety of figures and events during that year. One such portrait included passengers on the F train in New York reading the newspaper after “Black Monday.” The front cover of the New York Post read “Wall St. Bloodbath” in huge bold letters and “Panic selling sweeps market: P.5” at the bottom of the page. Six clocks sat between the two texts, reflecting the event’s global reach.

Here are some other descriptions of pictures from that time to highlight just how different our world is three decades on:

• Now-President-but-then-private-citizen Donald Trump greets Liza Minelli backstage at Carnegie Hall, along with his then wife Ivana Trump, and Henry and Nancy Kissinger. Fast forward 30 years (almost to the month) and likely much to his disbelief at that time he’s currently representing the free world by traveling abroad and meeting with foreign leaders. Far cry from real estate deals, that.
• The vice president of marketing for Compaq Computer Corporation shows off the new Compaq Portable III at the Mark Hellinger Theater in New York, which weighs just 18 pounds so that it’s easy (!) to carry. Now not only our computer but phone capabilities rest in just one device and fit right in our pockets, with the iPhone 7 weighing as light as between 5 to 7 ounces.
• Then First Lady Nancy Reagan watches an anti-drug musical, Just Say No, at a high school in Alexandria, Virginia. Tough to imagine now about two-thirds of Americans live in a state where some form of marijuana is legal. The momentum continues in that direction as well, with 60% of Americans favoring legalization of the drug according to a 2016 Gallup poll.
• About 200,000 people (according to US Park Police estimates) rally on the National Mall in support of gays and lesbians. Fast forward and we now have marriage equality.
• Bernie Sanders, then Mayor of Burlington, Vermont, records songs and a conversation about his philosophy on tape: “Sanders feels music is a powerful way to communicate with the masses.” Little did people see just how much he would connect with the masses this past presidential election, particularly among the politically hard to reach millennial cohort.
• For more photographs down memory lane, here’s a link to the article with everyone from David Bowie and Princess Diana to Pee-wee Herman and Howard Stern:

Thirty years ago, baby boomers were in their twenties and up, and now their kids’ ages span from nearly twenty to their mid-thirties. As those old photographs show, however, millennials’ experience in their twenties and thirties vastly differs from their parents socially, culturally, and economically. We therefore have different values and goals, which even extends to our financial lives.

A recent survey of over 1,000 Americans conducted from March 21st to April 5th by Merrill Edge showed a stark generational divide about different groups’ life priorities. Some of these findings may come as a surprise. Here are the results:

• Top life priorities: “millennials are the first generation to plan long-term for financial freedom instead of retirement.” Most (63%) millennials are “looking to save a set amount of money or income necessary to enjoy their desired lifestyle, compared to the majority (55%) of Gen Xers and baby boomers who are saving so they can leave the workforce.” Millennials are “significantly more likely than their older counterparts to focus on personal milestones of working at their dream job (42%, compared to 23%) and traveling the world (37%, compared to 21%).”
  • Additionally, “today’s 18- to 34-year-olds are also far less likely to emphasize the traditional family milestones of getting married (43%, compared to 51%) and being a parent (36%, compared to 59%).”
• Spending patterns: most millennials are more likely to spend money on “travel (81%), dining (65%) and fitness (55%) than save for their financial future.” The report attributes this to FOMO, or the “fear of missing out”.
• Savings: millennials “say they save 36% more than their generational counterparts, with more than one-third (36%) setting aside more than 20% of their salary per year.” As for overall respondents, 42% are saving less than 10% of their salary, while 7% don’t save anything.
  • Ironic given that Americans think the “Greatest Generation (54%) does a ‘very good’ job of saving, followed by baby boomers (45%), Gen Xers (19%) and millennials (8%).” In fact, just 15% of millennials think of themselves as good savers. So even though 45% of millennials consult their parents “always” or “often” for financial advice and think they’re better savers, it’s the opposite.
• Consequently, Americans aren’t saving enough and feel unprepared for uncertain scenarios. Most Americans “are not very confident they would be able to achieve their financial goals if they were to: get a divorce (71%), have children (64%), live to 100 years old (62%) or outlive their significant other (48%).” The problem, they are not “financially planning for these scenarios either, with only 5% saving for the possibility of divorce and 23% for the possibility of children.”
  • Therefore, 59% of respondents think Americans should be required to save for their own retirement, and 48% believe financial education should be required.
• Technology: Two in five Americans report “using an online or mobile portal to manage their investments.” Respondents also say using these platforms “has a positive impact that makes users feel more knowledgeable (51%), empowered (31%) and savvy (14%).” Going forward over the next decade, Americans “believe emerging technologies will allow more people to invest (41%)” and that a “majority of investments will become automated (34%), the 401(k) account will no longer be the ‘gold standard’ (29%), and the market will be dominated by women (13%).”
• As for robo advisors, one in eight (13%) Americans currently use one or would consider it in the next year. Zeroing in on millennials, however, brings this figure up to 22%.
• Link to the full report.

The upshot: whereas baby boomers save for retirement, millennials want financial freedom and save for their desired lifestyle rather than seeking to exit the workforce. Americans may view older generations as better savers, but millennials actually take the cake there. They just have different priorities that are shorter-term than their parents. Of course this could pose risks for millennials when they finally grow to their parents’ age and beyond, but this survey shows a clear way for financial professionals to best reach them: on mobile where they already give most of their attention, and addressing their unique take on life goals.

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Authored by Lance Roberts via RealInvestmentAdvice.com,

Since the election, much of the reasoning behind the surge higher in asset prices has been the expected tax cut/reform from the Trump administration which, as the theory goes, would lead to a surge in economic growth, higher inflation, and subsequently higher bond yields.

Unfortunately, given the lack of progress on the ACA replacement/repeal, the harsh pushback and criticism of Trump’s proposed budget, and the ongoing investigations and inner turmoil of the Trump Administration, the likelihood of tax cuts is becoming a much more distant reality. As such, the municipal bond market (and the Treasury market) have begun to aggressively discount the probability of significant tax reform any time soon.

Furthermore, the whole “reflation” trade also seems to come down to a similar agreement about the possibility of the Trump Administration to achieve any of its policy goals.

 

As shown below, the Dollar/Interest Rate trend is clearly negative.

As RBC macro strategist Mark Orsley wrote Friday:

“I am finding it increasingly difficult to see a near-term catalyst for UST’s to sell off.  In fact, almost all indicators I watch are flashing a warning that a breakdown in yields (longer end) is increasingly probable.” 

I have long been discussing that a move to 2% or below is quite likely (see here) but as Orsley points out:

“Technicals -> two head and shoulder formations point to lower yields. Target of 2.05% on the Feb/March formation, and if 2.17% gives way, the H&S from April/May targets 1.95%. Notice the MACD starting to trend lower…”

He is correct. A breakdown in yields will likely come with the realization that current earnings projections are far too optimistic to support current market valuations which will likely be coupled with concerns of a recessionary onset from further Fed rate hikes.  Any rallies in rates back to 2.4% should likely be used to add additional exposure to bonds for a trade in the weeks ahead.

As Orsley concludes:

“It may seem like a no-brainer to short at these levels into a Fed hike (at least this time the market isn’t going in at the yield highs), but all the above indicators should serve as a warning to bond bears. Despite cleaner short positioning, the pain trade still remains lower yields.“

I agree.

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It’s becoming a weekend tradition.

Almost exactly one week after the latest ballistic missile test launch by Pyongyang last Sunday, and two weeks after a similar launch the weekend prior, North Korea has fired its latest unidentified ballistic missile early on Monday, South Korea’s military said according to Yonhap News. The launch will be the 12th missile Pyongyang has fired this year.

North Korea test-fired a new mid-to-long-range rocket, which it calls the
Hwasong-12, on May 14, 2017

The unidentified missile was fired from near the North Korean coastal city of Wonsan, Seoul’s Joint Chief of Staff (JCS) said. The missile flew in a easterly direction, sources said.

The launch was immediately reported to President Moon Jae-in, who called a meeting of the National Security Council at 7:30 a.m. (2230 GMT Sunday), the South Korean office of the Joint Chiefs of Staff said in a statement, according to Reuters.

While there was little initial information, the North Korean projectile may fall into waters of Japan’s exclusive economic zone, according to Japan’s public broadcaster NHK which cited the Japanese government.

NHK also adds that the Defense Ministry is analyzing details such as projectile path, and added that the foreign ministry will – again – protest to North Korea using diplomatic channels.  Prime Minister’s office collecting information in task office from related agencies and heighten alert.

There has been no official response from the White House yet, altough we expect the token “the White House is aware of the launch” will be fortcoming momentarily.

Meanwhile, as reported yesterday, a third US aircraft carrier, the USS Nimitz is now making its way to the Korean Peninsula where it will join the Carl Vinson and Ronald Reagan, ahead of what many anticipate could be a “decapitation” attack on the North Korean regime.

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Last week, BofA’s HY credit strategist Michael Contopoulos, laid out a list of the four things that keep him up at night, which included:

1. Zombie Companies And Massive, Rising Student Debt Loads 

2. Sliding Used Car Prices, Rising Delinquencies And Subprime Defaults

3. Declining Loan Growth, Lack of commodity rebound and tighter balance sheet

4. Lack of Investment, No Small Business Creation And No Earnings growth

(there was more in the full article)

Having let the genie out of the bottle, just 24 hours later it was JPM’s turn to unveil its own answer to this same question, and in his weekly Froday note, JPM’s Jan Loeys said that when it comes to what “keeps the bank up at night” in the context of the bank’s economic outlook “regime change is the main risk.”

While that in itself is hardly unexpected or new, what we found surprising is that even JPM now admits that “large parts of society are not seeing any growth in income and job opportunities at all and thus demand change”  and as a result “regime change could thus come from politicians deciding we have gone too far in the trade-off between stability and growth.”

And in a preview of things yet to come, JPM concedes that “the anger of those left behind by slow and stable growth could lead to more populist measures that eventually give us both less stability and less growth.”

Or, alternatively, just wait until all those who voted for Trump in hopes of a radical systemic overhaul, end up being disappointed.  That’s when the real regime change will begin.

Here is the full excerpt from JPM’s note explaining what keeps America’s most valuable bank up at night:

The most frequent question we receive from you today is: What keeps us awake at night? To us, the main risk to our strategy and markets is a change in what we like to call the regime we are currently in.

The regime we believe we are in is one of a slow and stable global expansion, with cautious economic agents, conservative fiscal authorities, and determined central banks that provide easy money, but retain strict control on financial leverage. We note there are many potential shocks, from political turmoil to policy errors, that could disturb markets, but we will treat them as just volatility that should not affect our strategy if these shocks do not change the regime we are in. The shocks that keep us awake are the ones that could change the current regime into another one.

• Regimes do not last forever. Some die because they do not deliver the goods to society and voters demand change. Some die of their own success. The Global Moderation Regime from the mid-80’s to 2007 brought good growth, low macro volatility and shallow recessions. The longer it lasted, though, the more agents assumed it would be forever, thus inducing them to apply less caution and more leverage. This ultimately made the regime vulnerable to a regional fall in house prices in 2006-07 that would otherwise not have done that much damage.
• We note the current slow-and-stable regime risks coming to an early end if too many economic agents are dependent on easy money, or if it does not deliver the goods to society. This analyst thinks the latter risk is more acute as large parts of society are not seeing any growth in income and job opportunities at all and thus demand change.
• Regime change could thus come from politicians deciding we have gone too far in the trade-off between stability and growth, and that it is time to let companies and banks loose, through deregulation and tax reform/stimulus. Alternatively, the anger of those left behind by slow and stable growth could lead to more populist measures that eventually give us both less stability and less growth.
• The alternatives to our Slow-and-Stable regime could thus be called Growth, and Populism. Slow-and-Stable has been good for both equities and fixed income, with equities outperforming. A Growth Regime could boost equities even more, but would likely hurt fixed income badly as it would bring more inflation and monetary policy tightening than investors are prepared for. Populism would likely hurt both equities and bonds.

via http://ift.tt/2rvIb1U Tyler Durden