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Four Days After Predicting Oil Will Double, T. Boone Pickens Sells All Oil Holdings

Just four days ago, on Monday afternoon, “legendary” oilman T Boone Pickens said that crude has hit bottom at $26 per barrel, and predicting that prices should double within 12 months.

Pickens then doubled-down on his wrong call from last year, telling CNBC’s “Squawk Box” that oil prices will rise to at least $52 per barrel by the end of the year. That said, he was at least honest enough to admit that his virtually identical call from last year, when he thought prices would strongly rebound, was wrong.

Whether it’s $50 or $70 by the end of 2016 will largely be determined by the global economy, he added reiterating the same flawed thesis he used to justify his bullishness a year ago: “We’re still building inventories, and we will for the next several months. And then we’ll start to draw,” Pickens said. “Once you start to draw, you’re not going to start back building again. The draw will come here in the next few months. It’ll become pretty clear.”

He was wrong then, and he will be wrong this time again for the simple fact that while historically OPEC exercised a rational production strategy, as of the 2014 OPEC Thanksgiving massacre, there is no more OPEC, as can be seen by the relentless attempts by roughly half the members to call an OPEC meeting unsuccessfully, confirming what we said in late 2014 – OPEC no longer exists, which means it is every oil produer for themselves.

Putting T Boone’s forecasts in context, in a CNBC commentary in October, Pickens conceded his prediction for $70 oil by the end of 2015 wasn’t going to happen, because worldwide demand did not go up as much as he thought and supply did not markedly go down. Oil closed the year at $37: his prediction was off by 50%.

* * *

Yet while being merely wrong is excusable, being a “legendary” hypocrite is not.

Earlier today, literally days after he predicted oil would double from its $26 “bottom”, Pickens told Bloomberg that he has cashed out.

But, but, what happened to oil prices will double from their bottom? And did he just liquidate all his holdings just $4 above this so-called bottom?

Well… yes.

Pickens has sold all his oil holdings and is waiting for the best moment to get back in, he said Thursday in an interview on “Bloomberg Go.” With prices low, mid-size U.S. oil companies such as Pioneer Natural Resources Co., Anadarko Petroleum Corp. and Apache Corp. are acquisition targets for larger firms like Exxon Mobil Corp., he said.

So low, that he would be delighted if others first took advantage of these low, low, offers.

But what is most fascinating is that the broken record continues:

“The low is in,” he said. “Just don’t get in a rush here. You’re going to have plenty of opportunity. The market is going to be volatile. it’s not going to go straight up, so there will be good entry points.”

And, at least as far as Pickens is concerned, exit points.

So for anyone who listened to the CNBC and BBG commentator, and bought oil thinking he knows what he is talking about, our condolences:

Pickens won’t start investing again until crude inventories start to fall. In the U.S., commercial stockpiles have risen in 16 of the past 19 weeks and now stand at more than 500 million barrels for the first time since 1930, at the height of the East Texas oil boom.

“I will not re-enter, I’m sure, until we start to draw on inventories,” Pickens said. “That’s a key point.”

And just like that another rider of the dumb-luck momentum trade has been exposed for the “expert” charlatain he is.

Those who wish to waste 10 minutes of their life, can watch the clip below.

via Zero Hedge http://ift.tt/1QJr0xq Tyler Durden

US, Japan, Canada, Australia and 8 Other Countries Sign Trans Pacific Partnership Agreement

The Trans Pacific Partnership (TPP) would be horrible for Americans and the people of the world.

But most politicians are thoroughly corrupt. Neither the Democratic or Republican parties represent the interests of the American people. Elections have become nothing but scripted beauty contests, with both parties ignoring the desires of their own bases.

So today, 12 countries – Brunei, Chile, New Zealand, Singapore, Australia Canada, Japan, Malaysia, Mexico, Peru, United States and Vietnam – signed the TPP.

They never followed through on their promise of an open and lively debate.

Only by raising hell can we stop this monster.

via Zero Hedge http://ift.tt/1PXA2Kc George Washington

More “P”onzi-2-“P”onzi Blowups “Just A Matter Of Time” In China, Experts Warn

In early December, Ding Ning and his girlfriend Zhang Min were planning to make a run for it.

The couple had come to the end of the road with the massive fraud they were running through P2P lender Ezubo, which bilked some 900,000 people out money making it the largest ponzi scheme by number of victims in history.

Ultimately, the amount of money coming in was no longer sufficient to cover interest payments to existing clients. The pair attempted to bury the evidence in the backyard (literally) but police, using two excavators, managed to dig up 80 bags of documents buried 20 feet underground.

As a reminder, the company lured investors in with the promise of returns between 9% and 14%. In the end, nearly all of the “projects” featured on the site turned out to be fictitious.

We documented the story on Monday when we warned that this was just the type of event that could serve as the straw that breaks the camel’s back for a populace that’s already on edge thanks to a horrendous equity market meltdown and worries about the prospects for China’s currency and economy. Sure enough, the very next day, a bulletin began to make the rounds on Chinese social media calling for defrauded Chinese to “rise up” and stage nationwide protests until their money is refunded. The demonstrations would be called the “rights protection movement.”

“So stay tuned, because judging from the tone of the ‘rights protection movement’ bulletin the villagers are restless in China,” we said, before noting that Ezubo is probably just one of many P2P frauds in the country given that by November, there were over 3,600 such platforms in operation.

Bloomberg is out with a bit of color on China’s internet financing industry which was apparently allowed to flourish as Beijing attempted to figure out how to rein in shadow banking without choking off credit growth as the economy decelerated.

“China’s plan in allowing online lenders to flourish was to allow additional ways for small business to get financing rather than turn to back-alley shadow bankers — a shady world that was flourishing outside of government control when P2P lending began taking off in China in 2012 and only 3 percent of China’s 42 million small business owners could get bank loans,” Bloomberg wrote on Wednesday. “Online lending was a way for the government to encourage further economic stimulus in an economy growing at the slowest rate in a quarter century, and in theory it should be more transparent to regulators because it uses a real-time digital ledger of accounts.”

Yes, “in theory.” But in reality, these outfits are just as opaque as WMPs, trusts, channel loans, and the laundry list of other vehicles China uses to keep the credit impulse alive.

“I think the government allowed this all to happen because it was desperate to pump money into the private economy as all the other slowdowns started to happen,” Steve Dickinson, a Qingdao-based lawyer for Seattle firm Harris Moure PLLC, told Bloomberg by e-mail. “It is likely that the regulators at the top simply turned a blind eye to the risks in the desperate hope that this kind of lending vehicle would get them through a rough patch.”

“It was just a matter of time before we saw something this big keel over,” Zennon Kapron, managing director of Kapronasia, remarked.

And that means it’s “just a matter of time” before it happens again. Indeed, out of the 3,600 P2P operations in China, around 1,000 of them are deemed “problematic,” the China Banking Regulatory Commission says.

According to Xinhua, transactions on Chinese P2P sites topped $150 billion in 2015 up nearly 300% from the previous year. Sensing trouble, the CBRC published draft rules in December designed to control risk. “Due to the lack of necessary regulation, many P2P platforms play in the area between legal and illegal, using Internet concepts to brand themselves, fraudulent advertising and illegal deposit-taking to hurt public interest,” the body said.

“The harm is obvious. It’s going to damage financial reforms, cause social unrest and destabilize the regime to some extent,” Yang Dong, vice-dean at Renmin Law School and an expert on finance and securities law told Reuters this week.

We close with the following rather inauspicious headline from Bloomberg which hit the wires Thursday afternoon:

Bocom Halts Payments From Clients to Chinese P2P Lender

via Zero Hedge http://ift.tt/1THmnqt Tyler Durden

If Earnings Were “OK” And “We Are In A Bull Market”, This Would Not Happen

SHARES OF LIONS GATE ENTERTAINMENT FALL 5 PCT IN EXTENDED TRADE AFTER QUARTERLY RESULTS – RTRS
TABLEAU SOFTWARE SHARES TUMBLE 40 PCT IN AFTER HOURS TRADING – RTRS
YRC WORLDWIDE SHARES DOWN 16.4 PCT AFTER THE BALL FOLLOWING RESULTS – RTRS
SPLUNK INC SHARES DOWN 7.6 PCT IN AFTER HOURS TRADING – RTRS
LINKEDIN SHARES EXTEND DECLINE, DOWN 24 PCT AFTER RESULTS, GUIDANCE – RTRS
HANESBRANDS SHARES FURTHER ADD TO LOSSES IN EXTENDED TRADE, LAST DOWN 14.9 PCT – RTRS
OUTERWALL SHARES FALL 11 PCT IN EXTENDED TRADING AFTER QUARTERLY RESULTS – RTRS

via Zero Hedge http://ift.tt/1nKhJeK Tyler Durden

Jimmy Carter: “Legal Bribery” Is Prevailing In The US Political System

Submitted by Andrea Germanos via TheAntiMedia.org,

Former U.S. President and Nobel Peace Prize winner Jimmy Carter has taken aim at the “erroneous” Supreme Court ruling that “gives legal bribery a chance to prevail.”

Carter made the comments, an apparent reference to the 2010 Citizens United ruling, in an interview Wednesday with the BBC’s “Today” program.

Carter told interviewer John Humphrys that the ruling would have prevented a “relatively unknown farmer” like himself from emerging as a serious candidate. “Now,” he said, “there’s a massive infusion of hundreds of millions of dollars into campaigns for all the candidates.”

“Some candidates like [Donald] Trump can put in his own money but others have to be able to raise, I’d say, a hundred to two hundred million dollars just to get the Democratic or Republican nomination. That’s the biggest change in America,” he said, and one for the worse, adding that “the erroneous ruling of the Supreme Court where millionaires, billionaires can put in unlimited amounts of money directly into the campaign.”

“In a way,” Carter said, “it gives legal bribery a chance to prevail because almost all the candidates, whether they are honest or not, and whether they are Democratic or Republican, depend on these massive infusions of money from very rich people in order to have money to campaign.”

Carter contrasted today’s elections from when he was running for office, saying, “In those days when I ran against Gerald Ford, who was incumbent president, or later Ronald Reagan, who challenged me, we didn’t raise a single penny to finance our campaign to run against each other. We just used the $1 per person checkoff that every taxpayer indicates at the end of his or her income tax return. But nowadays, you have to have many hundreds of millions of dollars to prevail.”

Humphrys said that another change that seems to have occurred over the decades is that “many members of the middle class and working class, white people, have been disaffected form the political process” — something that Carter attributed to the fact that “they have, in effect, been cheated out of a proper opportunity to improve their lot in life” because “rich people finance the campaigns,” and “then when candidates get in office they do what the rich people want.”

Carter’s comments to BBC are similar to ones he made in September 2015, when he talked to Oprah Winfrey about the influence of money on elections, saying, “We’ve become, now, an oligarchy instead of a democracy.”

They also echo ones he made in 2012 when he denounced the “financial corruption” of elections and referred to “that stupid ruling” by the Supreme Court. “We have one of the worst election processes in the world right in the United States of America, and it’s almost entirely because of the excessive influx of money,” he said at the time.

Carter’s interview on BBC also covered the eradication campaign his foundation, the Carter Center, has been waging against guinea worm, a parasitic infection.

Carter, who’s 91 and has been undergoing treatment for cancer, said his hope is that he “can outlive the last guinea worm.”

via Zero Hedge http://ift.tt/1mgRc7M Tyler Durden

“With Rand Paul’s Exit, Has the ‘Libertarian Moment’ Died Once Again?”

You know the drill: Any time Rand Paul sneezes, libertarianism and the “Libertarian Moment” catches the Zika virus and croaks faster than a Bubble Boy touring an Ebola ward. So when the Kentucky senator pulled the plug on his presidential campaign, all sorts of Republicans, Democrats, conservatives, liberals, and even self-loathing libertarians started spiking the football like they were in the XFL.

Alas, like Abe Vigoda, the recently deceased actor who dealt with false reports of his death for the last 34 years of his life (after a premature obit once appeared in People magazine), libertarianism is constantly being written off as dead—or never having really existed in the first place.

And so it came to pass that Washingtonian magazine called me shortly after Rand Paul’s announcement to ask, “With Rand Paul’s Exit, Has the ‘Libertarian Moment’ Died Once Again?” From the story, by Andrew Beaujon:

…the Moment got thoroughly outpolled in early contests, not unlike…Rand Paul, who dropped out of the race for the Republican presidential nomination Wednesday, an event Ian Millhiser at ThinkProgress quickly commemorated with a piece called “Rand Paul and the Libertarian Moment That Never Was” and [National Review’s] Ramesh Ponnuru marked with “There Never Was a ‘Libertarian Moment.’”…

Reached by phone, Gillespie…says the Libertarian Moment is “absolutely independent of what idiot is running for president or dogcatcher.” Poll after poll, he says, shows younger people identifying with libertarian tenets like smaller government, unhappiness with government interference into their personal or sex lives, and unfettered business growth.

“If you enjoy the choice coming through your screen via Netflix,” he says, you’re chilling to libertarian principles….

Paul veered away from classic libertarianism in the race, especially with regard to gay marriage and immigration. (Gillespie and Reason have described him as “libertarian-ish.”) “If the Republican Party wants to benefit from its small-government rhetoric,” he says, “it has to become libertarian not just in its language but in its action.” Besides Netflix and Pop-Tarts, Gillespie sees libertarianism’s biggest impact in policies like school choice and forcing government units to compete with private entities to, say, run toll roads. The sum of all that libertarian thought, he says, is a “system that delivers a Whole Foods rather than a ‘Socialist Safeway‘ in Adams Morgan.”

Read the whole thing here.

In talking with Beaujon, I stressed that libertarianism is best understood as “pre-political” and that politics is a “crippled, lagging indicator” in American life (this is one of the basic tenets of Matt Welch’s and my book, The Declaration of Independents). Virtually everything in our lives that is not either directly controlled by or heavily regulated by government has been getting better over the past 30, 40, and 50 years precisely because innovation and increased personal and economic freedom have allowed for the sorts of experimentation and decentralization of power that accords with libertarian thought. Libertarians believe in giving people more autonomy and allowing them to make more choices about everything that matters to them. To the extent that things like trade barriers have been slashed, regulatory burdens reduced, social and legal sanctions lifted on lifestyles, that’s the political dimension of the libertarian moment right there.

And remember this: The internet, which embodies libertarian values of decentralized knowledge- and power-sharing, became a mass medium only when the government got out of the way and private companies built out the backbone and infrastructure to allow it to actually be useful to all of us. How did traditional liberals and conservatives, Democrats and Republicans respond to a new way of communicating, trading, and expression? By passing as part of telecommuncations legislation the Communications Decency Act of 1996, which would have essentially governed the internet (including the World Wide Web) as if it were a broadcast TV or radio station. From Bob Dole and Newt Gingrich to Bill Clinton and Janet Reno (and Hillary Clinton, too), everyone in political power signed on to limiting the freewheeling nature that made the internet different. Luckily, the Supreme Court struck down virtually all of the CDA as an affront to free speech (something which only libertarians, actually respect independent of particular outcomes. Indeed, liberal Democrats such as Hillary Clinton unapologetically seek to restrain speech they dislike (read Matt Welch’s “Hail to the Censor” on this score) while conservative Republicans are still trotting out “The Case for Censorship” when it floats their boats.

I would have liked to see Rand Paul get more traction in the 2016 election. For all the faults I thought his campaign had (and I was never slow to voice my opinion), he was by far and away the most libertarian-ish of the crew this time around, in either party. Certainly, I look forward to him resuming his powerful role in the Senate and ushering new and different conversations than we’d be having if he had remained an opthamologist. And there’s no question that libertarianism would be moving faster into the political arena if he had maintained the early leads for the GOP nomination he had a year ago.

But for cripes sake, it’s ridiculous to be writing off the Libertarian Moment and libertarianism simply because his presidential campaign went tits up. By the end of this year alone, we’ll have legalized pot in up to a dozen more states than we do now, school-choice and public-sector pensions will have been reformed in various places according the prescriptions laid out by the Reason Foundation (the nonprofit that publishes this website), serious criminal-justice reform will have been enacted, the pushback against military interventions willhave proceeded apace, and more. And that’s just in the political arena. In our commercial and personal lives, you can bet the rent money that there will be more individualized and hyper-personalized options for all of us or, same thing, obstacles to the same will be attacked relentlessly until they fall.

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“Islam Has Always Been A Part Of America”: Obama’s First Mosque Trip In Pictures

On Wednesday, President Obama visited the Islamic Society of Baltimore in his first trip to a US mosque as commander-in-chief.

Officially, the trip was “to celebrate the contributions Muslim Americans make to [America] and reaffirm the importance of religious freedom to our way of life.” But as we said on Monday, the visit was actually designed to counter the growing backlash against Islam in the US, where GOP hopeful Donald Trump has called for a ban on all Muslims entering the country.

We also said the following about what the likely fallout would be: “You can be sure that Obama’s visit will end up in a GOP soundbite in the days and weeks ahead.”

Predictably, Trump was among the first to take a swipe at the President.

“Perhaps he feels comfortable there,” Trump said on Wednesday evening, a rather transparent allusion to rumors about Obama’s faith and birthplace. “We have a lot of problems in this country,” Trump continued. “There are a lot of places he can go, and he chose a mosque.”

Yes he did, and below we bring you the pictures to prove it, images which we imagine won’t do a whole lot to change the minds of the 29% of Americans who still believe Obama is Muslim.

Allahu akbar?

* * *

Here’s Obama’s full speech in which the President tells the crowd that “Islam has always been a part of America”:

via Zero Hedge http://ift.tt/20uwNyM Tyler Durden

Politically Incorrect: Coen Brothers Don’t Care If Their Movie Isn’t Diverse Enough

Hail Don’t expect the Coen brothers to issue any apologies for contributing to the #OscarsSoWhite phenomenon: in a recent interview, the makers of Hail, Caesar! dismissed concerns that the film features an almost entirely white cast.

Joel Coen maintained that while diversity is important, the Oscars are not important. In any case, a filmmaker’s first obligation is to tell his story the “right” way, not the politically-correct way. (Hail, Caesar! was just released, and isn’t up for any awards this year, but the Coens were nominated for penning the Bridge of Spies screenplay.)

When The Daily Beast asked why there weren’t more minorities in Hail, Caesar!’s cast, Coen fired back with, “why would there be?”

“I don’t understand the question. No—I understand that you’re asking the question, I don’t understand where the question comes from.

“Not why people want more diversity—why they would single out a particular movie and say, ‘Why aren’t there black or Chinese or Martians in this movie? What’s going on?’ That’s the question I don’t understand. The person who asks that question has to come in the room and explain it to me.”

As filmmakers, is it important or not important to consciously factor in concerns like diversity, I asked.

“Not in the least!” Ethan [Coen] answered. “It’s important to tell the story you’re telling in the right way, which might involve black people or people of whatever heritage or ethnicity—or it might not.”

Their statements are almost shockingly honest, given that they seem likely to provoke the wrath of the social media left. The Washington Free Beacon’s Sonny Bunch comments, “That’s an incredibly blunt—and, frankly, incredibly refreshing—answer…. Anyway, I’m curious to see how these comments are received.”

In any case, while the controversy over this year’s Oscars has revolved around the assumption that the awards show isn’t representative of America’s broader diversity, Freethink Media’s Kmele Foster recently pointed out the shaky math behind that theory. As he said on Fox and Friends:

“Twenty percent of the wins in the ‘Best Actor’ category, for example, have gone to black actors. Blacks are not 20% of the population; they’re around 13% of the population… 12.4% of the nominations have gone to black actors…

I don’t doubt the sentiment here. I don’t doubt that people are concerned about this issue. I don’t doubt that you’re sincere in your concern about this issue. What I’m suggesting to you is that when I look at the actual facts here — the data — since 2000 to today, that across various categories, the fact of the matter is that blacks, relative to their percentage of the population, have been over-represented in some sense, not under-represented.

And it’s important to acknowledge that because regardless of who’s doing the nominating, it’s a ‘fair’ outcome.”

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Tonight’s Democratic Debate Between Bernie Sanders and Hillary Clinton is Really a Debate About President Obama

Tonight’s Democratic debate in New Hampshire is one of four additional contests scheduled just this week, and it will be the first to feature candidates Hillary Clinton and Bernie Sanders head to head, without Maryland Gov. Martin O’Malley on stage.

That these four officially sanctioned debates were added so late in the contest is, among other things, a recognition by Democrats that their primary race is something few predicted six months ago: a real race.

Bernie Sanders, the self-declared democratic socialist from Vermont, has outperformed almost everyone’s expectations in both support and fundraising, drawing Hillary Clinton to a virtual tie in the Iowa caucus this week after grinding down her 30-point lead. It was an impressive showing, and revealed both that Clinton is weaker than was widely assumed, and that Sanders and his message have a large audience in the Democratic party.

Hillary Clinton is still the strong favorite to win the nomination, but even still, the debates will serve as a forum to publicly hash out the future of the Democratic party.

Clinton is running as the practical, pragmatic candidate, the status-quo incrementalist in part because that’s who she is, but in part because that’s the direction she believes that’s the direction the party should go.

Sanders, conversely, is running explicitly as a revolutionary who would pursue wholesale overhauls of everything from the tax system to health care to campaign finance.

That Sanders has been so unexpectedly successful with this message is a testament to his authenticity and charm, and his surprising effectiveness as a campaigner.

But it’s also a reminder that there remains a pervasive and widespread dissatisfaction on the left with the status quo, some of which has to do with the general state of politics and polarization in Washington, but much of which is bound up in a brewing frustration with the Obama administration.

Hillary Clinton is explicitly running as the candidate who will protect and, if politically possible, carefully build on the liberal gains made under President Obama. This is clearest when it comes to health care, where she and Sanders have been squabbling over Sanders’ support of single payer.

“We have accomplished so much already,” she said in a debate last month. “I do not to want see the Republicans repeal it, and I don’t to want see us start over again with a contentious debate. I want us to defend and build on the Affordable Care Act and improve it.”

Defend. Build on. Improve. This is the kind of language that Hillary Clinton consistently uses when talking about the Obama administration’s legislative victories. It wouldn’t be perfectly accurate to say she’s running for Obama’s third term, but it wouldn’t unfair either. The point that she’s made, explicitly and implicitly, through out the campaign is that if you like what the Obama administration has done, and want to see that work preserved and protected, Hillary Clinton is your candidate.

That so many Democrats seem disinclined to stick with her suggests their frustration with the Obama administration’s policies and approach to politics.

So tonight’s debate won’t just be a battle over the future of the Democratic party, and whether it will choose the path of Hillary Clinton and the status quo or Bernie Sanders and his revolution. It will be a debate over the merits of the present administration, and its legacy in the Democratic party’s imagination.

Conservatives and libertarians might be confused by the progressive left’s frustration with President Obama, who is, for better or worse, one of the most successful and consequential liberal presidents in the modern era by most any measure.

But in many ways, it resembles the same sort of frustration with President Bush and congressional Republicans that boiled up on the right during President George W. Bush’s administration, erupted with the Tea Party in 2010, and continues to reverberate throughout the right in all sorts of surprising and unexpected ways. That’s something that Republicans should keep in mind in their assessments of the left, especially if they believe they might win the presidency in November. And it’s that Democrats should watch out for this season as well. Bernie Sanders and Hillary Clinton may represent Democrats’ current choices, but folks like Ted Cruz and Donald Trump may be the better illustrations of the party’s longer-term future.

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Have Stocks Priced In A Recession? (Spolier Alert: Not Even Close)

Submitted by Lance Roberts via RealInvestmentAdvice.com,

The Fed Is Behind The Curve…Again

Over the last couple of months, I have been discussing the technical deterioration of the market that is occurring beneath the surface of the major indices. I have also suggested there is more than sufficient evidence to suggest we may be entering into a more protracted “bear market cycle.”

The caveat to this, of course, has been the potential for a renewed round of Central Bank interventions that would theoretically once again postpone the onset of such a decline. To wit:

“The top section of the chart is a basic ‘overbought / oversold’ indicator with extreme levels of ‘oversold’ conditions circled. The shaded area on the main part of the chart represents 2-standard deviations of price movement above and below the short-term moving average.”

“There a couple of very important things to take away from this chart.

When markets begin a ‘bear market’ cycle [which is identified by a moving average crossover (red circles) combined with a MACD sell-signal (lower part of chart)], the market remains in an oversold condition for extended periods (yellow highlighted areas.)

More importantly, during these corrective cycles, market rallies fail to reach higher levels than the previous rally as the negative trend is reinforced.

Both of these conditions currently exist.

Could I be wrong? Absolutely.

This entire outlook could literally change overnight if the Federal Reserve leaps into action with a rate cut, another liquidity program or direct market intervention.”

This is just the most recent observation. I begin discussing the deterioration in the markets beginning last summer as early signs of the topping process began and I lowered portfolio model exposures to 50% of normal allocations.

However, despite the fact that interest rates have continued to trend lower, economic data and corporate profits have deteriorated, and inflationary pressures non-existent; most Fed speakers have sounded consistently hawkish and steadfast in their views of 4-rate hikes in 2016.

I have been steadfast in my claims that hiking rates given the current economic conditions is a mistake and will rapidly push the markets and economy towards a reversion. To wit:

“Looking back through history, the evidence is quite compelling that from the time the first rate hike is induced into the system, it has started the countdown to the next recession. However, the timing between the first rate hike and the next recession is dependent on the level of economic growth at that time.

When looking at historical time frames, one must not look at averages of all rate hikes but rather what happened when a rate hiking campaign began from similar economic growth levels. Looking back in history we can only identify TWO previous times when the Fed began tightening monetary policy when economic growth rates were at 2% or less.

(There is a vast difference in timing for the economy to slide into recession from 6%, 4%, and 2% annual growth rates.)”

“With economic growth currently running at THE LOWEST average growth rate in American history, the time frame between the first rate and next recession will not be long.”

It is now becoming quite apparent that the majority of economists, analysts, and Fed members have been quite mistaken in their assessments of the impact of global turmoil and the collapse in commodity prices on the domestic economy. (Read my previous commentary on oil and China)

From Market News: (Via ZeroHedge)

“Top Federal Reserve policymakers are leaving little doubt the financial turbulence and souring of the global economy could have significant implications for U.S. monetary policy, but they are loathe to draw too many conclusions about the appropriate path of interest rates at this juncture.

One thing is for certain: The tightening of financial conditions that has taken place since the Fed began raising short-term rates in mid-December is a matter of considerable concern to the Fed, New York Federal Reserve Bank President William Dudley said in an exclusive interview with MNI Tuesday.

But, it was supposed to signal the US economy is ‘strong enough’ to sustain a lift off and decouple from the rest of the world which is scrambling to cut rates. Guess not.

As MNI adds, “a weakening of the global economy accompanied by further appreciation in an already strong dollar could also have “significant consequences” for the U.S. economy, Dudley told MNI.”

“I can give you my own interpretation,” the committee’s vice chairman replied. “I read that as saying we’re acknowledging that things have happened in financial markets and in the flow of the economic data that may be in the process of altering the outlook for growth and the risk to the outlook for growth going forward.”

“But it’s a little soon to draw any firm conclusions from what we’ve seen,” he cautioned.”

If history serves as any guide, with the entire flow of data from economic underpinnings, high-yield markets, commodity prices and deteriorating profits screaming for help, by the time the Fed “draws any firm conclusions” it will be far too late to make any real difference.

Interest Rate Predictions Come To Fruition

Well, that didn’t take long. At the beginning of this year, I wrote in the 2016 Market Outlook & Forecast the following:

“With the Federal Reserve raising interest rates on the short-end (Fed Funds), it will likely push the long-end of the curve lower as the economy begins to slow from the effects of monetary policy tightening.

From a purely technical perspective, rates have been in a long-term process of a tightening wedge. A breakout to the upside would suggest 10-year treasury rates would soar to 3.6% or higher, the consequence of which would be an almost immediate push of an economy growing at 2% into recession. The most likely path, given the current economic and monetary policy backdrop, will be a decline in rates toward the previous lows of 1.6-1.8%.(Inflation will also remain well below the Fed’s 2% target rate for the same reasons.)

“Of course, falling rates means the ongoing “bond bull market” will remain intact for another year. In fact, if my outlook is correct, bonds will likely be one of the best performing asset classes in the next year.”

When I wrote that missive, rates were at 2.3%. Yesterday, they touched 1.8% and intermediate and long duration bonds have been the asset class to own this year.

While rates will likely bounce in the short-term, I still suspect rates will finish this year closer to the low-end of my range.

Have Stocks Priced In A Recession?

I have read a significant amount of commentary as of late suggesting that the current decline in stocks have “priced in” the economic and earnings weakness we are currently witnessing.

Such is hardly the case. There are two primary indicators that warrant such skepticism.

The first is valuations.

The chart above is a 5-year Cyclically Adjusted Price Earnings (CAPE) ratio (data source: Dr. Robert Shiller.) By speeding up the time frame from 10-years to 5-years, we find that valuation changes have shifted from being more coincident prior to 1970, to more leading currently. As shown, the downturn in valuations has been a leading indication of more severe market corrections particularly since the turn of the century.

The second is profits.

While still early into 2016, it already appears that earnings will post an annual decline for the second year running. Annual declines in earnings have historically been more evident during recessionary economic cycles (which only makes sense as consumption slows.)

It is not just me suggesting that risk is currently high either. Here is a note from RBC:

“Based on current valuations, the prices of most stocks don’t appear to have factored in a recession scenario, ‘hence the downside should we see a recession could be rather severe,’ RBC Capital Markets’ global equity team wrote in a research note to clients who believe the shares of most companies could still fall another 50% or more from current levels.”

Such declines have been consistent with past economic/earnings recessions as “overvaluation” reverts back to “undervaluation.”

Just some things to think about.