Author: admin

Submitted by Eric Zuesse via Strategic-Culture.org,

California alone accounted for all of Hillary’s popular-vote win, plus 1,405,004 votes

America’s Electoral College – the publicly elected representatives who select the U.S. President – voted on Monday, December 19th, and chose Donald Trump as America’s next President, though Hillary Clinton had won nearly three million more of the nation’s popular votes on November 8th than he did.

Here was the top of the homepage of the anti-Trump (and anti-Russia) Huffington Post, in America, on Monday night, December 19th, focusing on Hillary Clinton’s having won more people’s votes than Trump did:

How significant is it that Ms. Clinton had won the votes of more Americans, but Mr. Trump has won the votes of more Electors? Here are the relevant facts, by which to understand this:

In some respects, the United States of America is a federal system, not a unitary state system. The U.S. Constitution established the nation that way, and it remains in effect to this day. The Electoral College chooses the nation’s President, and it consists of Electors who represent their individual states, but it is constructed according to a formula (for weighting each state’s influence in selecting a President) that apportions the number of Electors so as to correlate rather closely with each given state’s population. Thus, the Electoral College is partly a unitary-state system (one-person-one-vote), and partly a federal-state system (each state having different-sized delegations in the Electoral College, depending upon each state’s population-size).

America’s by-far largest state, California, accounts, all on its own, for the entirety of Hillary Clinton’s popular-vote victory — and more besides.

Her win of the U.S. popular vote was two-thirds the size of her win of the California popular-vote. The one state of California accounts for 1.49 times her win of the national vote. California accounted for all of her 2,864,974 national-vote win, plus an additional 1,405,004 votes.

Figures here are from Wikipedia, as of 19 December 2016:

• Hillary’s California victory-margin over Trump:  CA     4,269,978
• Hillary’s nationwide popular-vote victory-margin: U.S.   2,864,974

Hillary’s nationwide 2% win by 2,864,974 votes would have been a nationwide loss by 1,405,002 votes, if she had won California by 50 %+1 vote, to 50%-1 for Trump. Instead, she won California by 61.73%, to 31.62%. (Furthermore, in the Electoral College, almost all states have established a winner-take-all-rule, so that, for example, «all 55 of California’s Electoral votes go to the winner of the state election, even if the margin of victory is only 50.1 percent to 49.9 percent» — in other words, she didn’t win any more Electoral College votes from her 61.73% California landslide win than she would have won by a bare 50%+1 win of California).

Hillary’s 4,269,978-vote win of California was 1.49 times — 49% larger than — her nationwide 2,864,974-vote win.

In addition, Hillary also scored big wins in three other big liberal states: NY, IL, and MA.

The following 3 states total to  3,592,220 votes:

• NY      1,702,792
• IL      944,714
• MA      904,303

The grand total of the 4 states (NY, IL, MA, and CA): 7,862,198

But, even if Hillary had won those three states by only around 50-50, her 4,269,978-vote edge over Trump in CA would still have been 4,269,978 – 3,592,220 = 677,758 popular votes more than Trump in these four mega-liberal states together (as compared to her actual win there of 7,862,198 popular votes). That would have switched 7,862,198 – 677,758 = 7,184,440 of her votes to Trump, and so he still would have won clearly the popular vote. He and she would not have done any differently in the Electoral College than they have, in fact, done, but Trump would have scored a huge win in the nationwide popular vote — a much bigger win in the popular vote than Hillary has, in fact, won. 

If the nation had violated the Constitution and handed Ms. Clinton the win due to her 2,864,974 popular-vote victory, then it would have been handing the entire Presidency to the winner of the biggest state, and written off all the rest of the United States — where Clinton lost overwhelmingly. Fortunately, that did not happen. 

The evidence therefore shows that Trump won the Presidency by strategizing strictly upon the basis of the U.S. Constitution, and not — as Hillary evidently did — at least partly upon the national popularity-contest. He devoted his resources to the key toss-up states, and ignored the states — including CA, NY, IL, and MA — where the polling showed that his campaigning would be an utter waste of his time and money.

The four mega-liberal states — New York, California, Illinois, and Massachusetts — happen also to be America’s four national-‘news’-media centers; and, so, this reality, and Trump’s win of the election (the Electoral College), naturally strikes many in the national press (such as the owners of the Huffington Post) as being wildly at variance with their ‘rational’ expectations, because those people aren’t so intelligent, and they reason upon the basis of mental structures different from the reality. (Maybe they are also stupid enough to believe her campaign-rhetoric even though it contrasted sharply with her actual decisions and policies as a government-official.) Furthermore, they are wildly out-of-touch with the pain throughout the rest of the country, and they accept the aristocracy’s false analysis of its causes and of its solutions (the cause isn’t bigotry against women, minorities, etc. It is their own bigotry against the poor — of any group); so, they think that Hillary was ‘obviously’ better than Trump, and cannot imagine that she’s worse (or even worse, if Trump too is bad) than Trump. This blindness-to-reality enables the ‘news’ media to support vigorously the Democratic Party’s attempts to de-legitimize Trump as President. They believe strongly in the aristocracy’s ideology (that the barrier to equality-of-opportunity is more an ethnic bigotry than it is a class-bigotry) and so they continue to obsess upon ethnicity, gender, etc., even after the past year’s political results, both in the U.S. and in Europe, are showing how divorced from the reality, they actually are.

This explains why the owners of America’s ‘news’ media tend to be both perplexed and angry that Hillary Clinton (whose basic campaign theme was that there is no class-problem in America, but only many different bigotry-problems) lost this election.

via http://ift.tt/2h7vHnw Tyler Durden

So far, so expected. After earlier announcing the failure to attract any anchor investors for a private capital raise, Monte Paschi has announced that it will officially ask the Italian government for a "precuationary capital increase" – in other words a bailout. The funds will come from the newly decreed EUR20 billion bailout fund, and as Bloomberg reports will not trigger a "bail-in."

This is the third bailout in three years and reportedly the biggest nationalization in Italian history.

As Bloomberg reports, Italy will plow as much as 20 billion euros ($21 billion) into the country’s banks after Banca Monte dei Paschi di Siena SpA failed to secure its future by raising funds from investors, and other lenders could follow.

Finance Minister Pier Carlo Padoan told reporters after a cabinet meeting in Rome that he expected Monte Paschi to ask for aid.

 

"We will see if other banks ask for aid,” Padoan said at the press conference. Italian Prime Minister Paolo Gentiloni said EU officials agreed with Italy’s plan to provide support to the country’s banking system.

And sure enough, once the bailout decree was approved, Monte Paschi, the world’s oldest lender, late Thursday abandoned plans to raise 5 billion euros from the market.

The bank said it was scrapping the entire capital plan, including the sale of bad loans and the debt for equity swap, and confirmed in a statement that it will ask Italy for a “precautionary capital increase.”

The FT notes that Italian officials hope government intervention will put an end to MPS’s woes and restore confidence in other struggling financial institutions.

Due to EU rules designed to limit the hit to taxpayers, the government rescue will impose losses on MPS shareholders and junior bondholders, making them share some of the financial burden. As Bloomberg confirms:

• *ITALY GOVT SAYS PRECAUTIONARY RECAP DOESN'T TRIGGER BAIL IN
• *PASCHI TIER 1 BOND CONVERSION AT 75% OF NOMINAL VALUE
• *PASCHI TIER 2 BOND CONVERSION AT 100% OF NOMINAL VALUE

With Junior bonds already trading at extreme distress the modest-to-nothing haircuts imposed are likely a relief to some as Italy noted "the burden-sharing principle will be respected but we will try to limit the damage to savers as much as possible."

"A nationalization should have been done five years ago,” said Francesco Confuorti, the CEO of Advantage Financial SA, a Milan-based investment firm. “The bank lost time, money and credibility seeking to keep the patient on life support when he was in an irreversible coma.”

The bigger problem now for Monte Paschi, as we detailed earlier, is the recent plunge in deposits, which as reported yesterday has suffered a €14bn rush of deposit outflows in the nine months from January to September this year – 11 per cent of its total deposits, as shown in the following FT chart.

Should the nationalization fail to stem the bank run, either at Monte Paschi, or other Italian banks, more bailouts are imminent.

And finally, as The FT points out, there is always Germany to mess up these plans…

One of the big concerns associated with Italy’s banking rescue is that it will worsen the country’s fiscal outlook at a time when it already has one of the highest ratios of debt to gross domestic product in Europe, at 133 per cent.

 

Assuming all of the €20bn is used during the coming year, that would amount to about 1.2 per cent of GDP, making it highly unlikely that Italy could meet its commitments on managing its debt under EU budget rules.

 

Italian officials have insisted that the rescue would be a “one-time” effort, which was temporary and therefore would not impact the structural balance, which is one of the key fiscal measures used by the EU.

 

The European Commission said it “takes note” of the changes to some public finance targets.

And by "take note" we pre-suppose they mean extract some pint of blood from some unsuspecting taxpaying public. 

via http://ift.tt/2ilg5hc Tyler Durden

With VIX at multi-year lows (a 10-handle!!) and stocks at record highs amid Trumpian (Goldman) exuberance, it appears options traders in the VIX complex are anything but "believers."

SVXY is an ETF that portends to track the inverse of VIX – in other words, as VIX drops, SVXY rises…

(ignore the decay issues for now).

So, if a trader buys Puts on SVXY, he is implicitly betting on SVXY dropping which is VIX rising and, ceteris paribus, stocks dropping.

So, despite all the hope; all the promise; all the hype; why are options traders panic-buying SVXY Puts at an extraordinary clip?

 

We are sure this is nothing right? But while the world is awash with complacency, it appears professionals have found a quiet dark corner of the markets to buy protection against the inevitable drop without Bob Pisani seeing it.

 

via http://ift.tt/2i7flwT Tyler Durden

Guns and knives are, in many ways, the best self-defense tools.

However – as police academies across the United States teach – a bad guy with a knife can charge and kill a good guy armed with a handgun if they're 21 feet apart or less.

In other words, before you have time to draw aim and fire your gun, you may get fatally stabbed.

In addition, if you live in New York, California or another state which makes it hard to carry concealed guns and knives – or you work in the financial services, legal or other professional setting where weapons are frowned upon – you might not be able to carry a gun or knife with you during your normal work day. (And many people don't understand the Second Amendment).

In my state, for example, it's illegal to carry switchblades or even assisted-opening knives. And manual "one-handed opening knives" don't really work as advertised.

Any weapon which you don't already have in your hands may be limited in its real-world usefulness. And you obviously can't walk around brandishing your gun and knife for no good reason.

What to do?

Find an every day object which is legal anywhere in the world, in any city or state, in any work environment … and which you can hold in your hands at all times. The best self-defense weapon is one (1) you can carry with you anywhere and (2) which is an innocuous, every day item.

Self-defense expert Thomas Kurz – a judo instructor, trained in boxing and Kyokushin karate, who knows how to kill a man with an everyday pencil or pen – has designed a weapon you can carry anywhere, and which will keep you dry when it rains: the Unbreakable Umbrella.

Several top martial artists – such as stick-fighting expert Marc "Crafty Dog" Denny – have endorsed the Unbreakable Umbrella.

Because a picture is worth a thousand words, you've got to see the videos below to get why this is such a good self-defense weapon …

But first let me briefly describe my experience with the Unbreakable Umbrella.

Normal umbrellas break in a strong wind or after accidentally hitting something. I've gone through scores of umbrellas over the years, and it's frustrating.

But I hit my heavy punching bag as hard as I could with the (1) tip, (2) handle and (3) side of the Unbreakable Umbrella, and it did absolutely no damage to the umbrella.

These videos show how strong this umbrella is, and how anyone can use it for defense … without any training:

These videos show advanced applications of a weaponized umbrella:

Indeed – with training – the umbrella can successfully defend against knife attacks (which are notoriously hard to defend):

The umbrella is actually a fairly well-known gentleman's self-defense system. If you think about it, you might remember seeing it on tv and in movies … for example Sherlock Holmes or The Avengers:

Women can use it as well:

The Premium Unbreakable Umbrella is a BIFL (buy it for life) item, which comes with a lifetime warranty. Buy one, and you'll never have to buy another umbrella (you may have to replace the fabric if you get in a fight, but the rest of the umbrella will still be solid, reliable and undamaged. Kurz sells replacement fabric kits).

The Telescopic Unbreakable Umbrella is small enough to fit in laptop cases or bags, briefcases, daypacks, book bags, etc. (You can also stuff it in a pocket, although it's a little bulky for that.) With the flick-of-the-wrist telescoping action Kurz demonstrate in his videos, this could be ideal to surprise would-be attackers with the extra reach. Specifically, an attacker might think that they are out of your reach … but with a quick telescopic opening, you could reach them.

While not cheap, having a weapon that is indestructible – so that you know you can actually use to defend your life – is invaluable. The Unbreakable Umbrella is undoubtedly the best self-defense umbrella in the world … as well as a fantastic way to keep the rain off you, even in the strongest winds.

Note: I haven’t received a cent for writing this review. Kurz simply provided me review copies of the Premium and Telescopic Unbreakable Umbrellas.

via http://ift.tt/2hhOotK George Washington

Submitted by Frank Shostak via The Mises Institute,

Why are the dollar bills in people's pockets worth anything? According to some experts, the dollar bills carry value because the government in power says so. Other experts are of the view it is because people are willing to accept it as payment.

To say that the value of money is on account of the government or on account of social convention is to say very little. In fact, what experts are saying is that money has value because it is accepted, and why is it accepted? … Because it is accepted!

The Difference Between Money and Other Goods

Demand for a good arises from its perceived benefit. For instance, people demand food because of the nourishment it offers them. With regard to money, people demand it not for direct use in consumption, but in order to exchange it for other goods and services. Money is not useful in itself, but because it has an exchange value, it is exchangeable in terms of other goods and services. Money is demanded because the benefit it offers is its purchasing power (i.e., its price).

For something to be accepted as money it must have a pre-existing purchasing power, a price. So how does a thing that the government proclaims will become the medium of exchange acquire such purchasing power — a price?

We know that the law of supply and demand explains the price of a good. Likewise it would appear that the same law should explain the price of money. But there is a problem with this way of thinking since the demand for money arises because money has purchasing power (i.e., money has a price). Yet if the demand for money depends on its pre-existent price, i.e., purchasing power, how can this price be explained by demand?

We are seemingly caught here in a circular trap, for the purchasing power of money is explained by the demand for money while the demand for money is explained by its purchasing power. This circularity seems to provide credence to the view that the acceptance of money is the result of a government decree and social convention.

Mises Explains How the Value of Money Is Established

In his writings, Mises had shown how money becomes accepted.1 He began his analysis by noting that today's demand for money is determined by yesterday's purchasing power of money. Consequently for a given supply of money, today's purchasing power is established in turn. Yesterday's demand for money in turn was fixed by the prior day's purchasing power of money.

So, for a given supply of money, yesterday's price of money was set. The same procedure applies to past periods.

By regressing through time we will eventually arrive at a point in time when money was just an ordinary commodity where demand and supply set its price. The commodity had an exchange value in terms of other commodities, i.e., its exchange value was established in barter. To put it simply, on the day a commodity becomes money it already has an established purchasing power or price in terms of other goods. This purchasing power enables us to set up the demand for this commodity as money.

This in turn, for a given supply, sets its purchasing power on the day the commodity starts to function as money. Once the price of money is fixed, it serves as input for the establishment of tomorrow's price of money. It follows then that without yesterday's information about the price of money, today's purchasing power of money cannot be established.

With regard to other goods and services, history is not required to ascertain present prices. A demand for these goods arises on account of the perceived benefits from consuming them. The benefit that money provides is that it can be exchanged for goods and services. Consequently, one needs to know the past purchasing power of money in order to establish today's demand for it.

Using the Mises framework of thought, also known as the regression theorem, we can infer that it is not possible that money could have emerged as a result of a government decree or government endorsement or social convention. The theorem shows that money must emerge as a commodity.

On this Rothbard wrote,

In contrast to directly-used consumers' or producers' goods, money must have pre-existing prices on which to ground a demand. But the only way this can happen is by beginning with a useful commodity under barter, and then adding demand for a medium to the previous demand for direct use (e.g., for ornaments, in the case of gold). Thus government is powerless to create money for the economy; it can only be developed by the processes of the free market.2

But how does all that we have said so far relate to the paper dollar? Originally paper money was not regarded as money but merely as a representation of gold. Various paper certificates represented claims on gold stored with the banks. Holders of paper certificates could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper certificates to exchange for goods and services when these certificates came to be regarded as money.

These certificates acquired purchasing power on account of the fact that these certificates were seen as representative of gold. Note that according to the regression theorem, once the purchasing power of a certificate is established it can function as money regardless of gold since now the demand for money can be established. Remember the demand for money is on account of its purchasing power.

Paper certificates that are accepted as the medium of exchange open the scope for fraudulent practice. Banks could now be tempted to boost their profits by lending certificates that were not covered by gold.

In a free-market economy, a bank that over-issues paper certificates will quickly find out that the exchange value of its certificates in terms of goods and services will fall. To protect their purchasing power, holders of the over-issued certificates would most likely attempt to convert them back to gold. If all of them were to demand gold back at the same time, this would bankrupt the bank. In a free market, then, the threat of bankruptcy would restrain banks from issuing paper certificates unbacked by gold.

The government can, however, bypass the free-market discipline. It can issue a decree that makes it legal for the over-issued bank not to redeem paper certificates into gold. Once banks are not obliged to redeem paper certificates into gold, opportunities for large profits are created that set incentives to pursue an unrestrained expansion of the supply of paper certificates. The uncurbed expansion of paper certificates raises the likelihood of setting off a galloping rise in the prices of goods and services that can lead to the breakdown of the market economy.

To prevent such a breakdown, the supply of paper money must be managed. The main purpose of managing the supply is to prevent various competing banks from over-issuing paper certificates and from bankrupting each other. This can be achieved by establishing a monopoly bank — i.e., a central bank — that manages the expansion of paper money.

To assert its authority, the central bank introduces its own paper certificates, which replace the certificates of various banks. The central bank money's purchasing power is established on account of the fact that various paper certificates, which carry purchasing power on account of their historical link to gold, are exchanged for the central bank money at a fixed rate. The central bank's paper certificates are fully backed by bank certificates, which have the historical link to gold.

It follows then that it is only on account of the historical link to gold that the central bank's pieces of paper acquired purchasing power.

Contrary to the popular way of thinking, the value of a paper dollar originates from its historical link to commodity money — which happens to be gold — and not government decree or social convention. Fiat money of the sort we use today could not and would not come about in a market setting. What the market created — gold-based money — the government had to destroy before leaving us with paper money whose value as a currency depends on the management practices of the central bank.

via http://ift.tt/2i0eykc Tyler Durden

As the FT first reported yesetrday, in a dramatic development for Sino-US relations, Trump picked Peter Navarro, a Harvard-trained economist and one-time daytrader, to head the National Trade Council, an organization within the White House to oversee industrial policy and promote manufacturing. Navarro, a hardcore China hawk, is the author of books such as “Death by China” and “Crouching Tiger: What China’s Militarism Means for the World” has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance, a message that the president-elect sold to voters across the US during his campaign.

In the aftermath of Navarro’s appointment, many were curious to see what China’s reaction would be, and according to the FT, Beijin’s response has been nothing short of “shocked.” To wit:

The appointment of Peter Navarro, a campaign adviser, to a formal White House post shocked Chinese officials and scholars who had hoped that Mr Trump would tone down his anti-Beijing rhetoric after assuming office.

 

“Chinese officials had hoped that, as a businessman, Trump would be open to negotiating deals,” said Zhu Ning, a finance professor at Tsinghua University in Beijing. “But they have been surprised by his decision to appoint such a hawk to a key post.”

Shortly after the announcement of Navarro’s appointment, the US Office of the Trade Representative yesterday put added more fuel to trade tensions with Chine when it put Alibaba, China’s biggest e-commerce platform, back on its “notorious markets” blacklist of companies accused of being involved in peddling fake goods.

Cui Fan at the China Society of WTO Studies, a think-tank affiliated with China’s commerce ministry, warned that Beijing would respond to any unilateral action by the incoming Trump administration. “China is preparing itself for US trade actions,” he said. “China will respond with counteractions of its own.”

China has found itself on the receiving end of diplomatic chaos for much of the past three weeks, starting with Trump accepting a congratulatory phone call from Taiwan president Tsai Ing-wen in early December, which defied almost four decades of precedent. It only escalated from there, and culminated with the confiscation of a US marine drone last week, which however, China promptly returned to the US earlier this week.

Trump’s recent rhetoric has given China cause for concern: since the call with Ms Tsai, he has publicly criticized China’s currency policies and island fortifications in the South China Sea. He has questioned Washington’s commitment to the One China policy, and also angered Beijing when he suggested that the confiscated navy drone was “stolen” by a Chinese ship. 

Wang told the People’s Daily: “We will lead the way amid a shake-up in global governance and take hold of the situation amid international chaos. We will protect our interests amid intense and complex games.”

Meanwhile, He Weiwen, deputy director of the Center for China and Globalisation, told the FT that Beijing could retaliate against US exports and restrict market access for US companies.

* * *

In short, China is angry, and may get its wish to retaliate soon, because as CNN reports (take it with a “real fake news” grain of salt) Trump’s transition team is discussing a proposal to impose tariffs as high as 10% on imports. A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed at spurring US manufacturing, which could be implemented via executive action or as part of a sweeping tax reform package they would push through Congress.

According to CNN, Reince Priebus floated a 5% tariff on imports in meetings with key Washington players last week. But the senior transition official who spoke to CNN Thursday on the condition of anonymity said the higher figure is now in play.

Such a move would, if confirmed, would likely send the US hurtling into a trade war with other countries, especially China which is already “shocked” by recent Trump action, while sending the cost of consumer goods in the US even higher. “And it’s causing alarm among business interests and the pro-trade Republican establishment.”

The senior transition official quoted by CNN also said the transition team is beginning to find “common ground” with House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady, pointing in particular to the border adjustment tax measure included in House Republicans’ “Better Way” tax reform proposal, which would disincentivize imports through tax policy. The border tax, as explained here two days ago, would also lead to trade wars with key trading partners as it is the functional equivalent of a USD devaluation and is represents yet another tax on foreign exports.

 

Curbing free trade was a central element of Trump’s campaign. He promised to rip up the North American Free Trade Agreement with Mexico and Canada. He also vowed to take a tougher line against other international trading partners, almost always speaking harshly of China but often including traditional US allies such as Japan in his complaint that American workers get the short end of the stick under current trade practices.

And now, if CNN is correct, Trump may be about to follow through with it. The question on everyone’s lips, then, is with China having repeatedly warned it will retaliate if and when the US launched the first salvo in what will clearly be an escalating trade war, just how will China escalate.  One potential way is through its holdings of $1.1 trillion in US Treasuries and various other US assets.

 

As we reported earlier today, a SAFE official told reporters at a briefing that while China will make “tactical adjustments” on its US debt holdings, Beijing’s long-term investment view on US debt has not changed, and that U.S. Treasuries are China’s long-term strategic investment targets. That, too, may also change quickly.

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

Submitted by Mac Slavo via SHTFPlan.com,

Here’s more evidence that the “recovery” never really happened, and good reason to think that the entire social safety net structure is doomed to fall apart.

The birthrate, long tied to economic growth, has been dropping to its lowest point in recorded history – both nationally and, in particular, in the state of California.

This demographic shift is bad news for the economy – in terms of housing, consumer markets, and especially for the long-term funding of social security, medicaid, medicare and other obligations that younger generations have typically been expected to pay into.

Whether or not you agree with the system in place, the fact that it is virtually certain to go bankrupt before the generation of baby boomers shift off this mortal coil should be troubling to everyone planning a future in the United States.

Official numbers show that the birthrate began to steadily decline in 2008 when the crisis hit and – unlike even during the Great Depression – hasn’t ever picked back up. 2016 saw the lowest point ever for California, even with higher births from immigrants factored in.

via the L.A. Times:

California’s birthrate dropped to its lowest level ever in 2016, according to data released by the state’s Department of Finance.

 

Between July 2015 and July of this year, there were 12.42 births per 1,000 Californians, the agency said this week. The last time the birthrate came close to being that low was during the Great Depression, when it hit 12.6 per 1,000 in 1933.

 

But, unlike after the Depression, birthrates haven’t bounced back quickly as the economy has picked up.

 

California has been experiencing a years-long downward trend that likely stems from the recession, a drop in teenage pregnancies and an increase in people attending college and taking longer to graduate, therefore putting off having children…

 

“Eventually you think about having a child and by this point in time you’re in your early 30s,” he said… when women’s fertility begins to decrease…

 

Similarly, the national birthrate began falling in 2008 and continued to do so through 2013, when it hit a record low of 12.4 per 1,000 people.

Already, states and cities are unable to meet their pension obligations. A very bad game of musical chairs is in the works, and unless something major changes, it could spell ruin for aging generations to come, who will be forced to contend with a shrinking pool of support – both officially and unofficially – from younger generations.

As the Wall Street Journal reported earlier this year:

Sales of single-family homes are being weighed down by what Robert Dietz, chief economist at the National Association of Home Builders, calls “the great delay,” the trend of millennials postponing milestones like marriage and having kids. Other ripple effects take years to show up, such as the drag of having fewer young workers paying into Social Security and Medicare…

 

[…]

 

“Everything is slower than we expected,” said Sam Sturgeon… he predicts that the total fertility rate won’t go above 1.9 babies per woman for the next five years or longer. An ideal birth rate is around 2.1 babies per woman, demographers say, since that’s the rate that’s needed to replace the current levels of population.

Right now, there is considerable optimism about a renewed age for the free market in America. Business is being wooed back by President-elect Trump.

But in the long term, the demographic pressures could impact the care and survival of the population. All the more reason to prepare for the worst, and reduce one’s dependency on the system as much as possible.

As Michael Snyder explained, the upcoming generation of “snowflake” millenials are, as whole, reluctant to move out of their parent’s basements, have difficulty finding real jobs, are stifled by student loans and a lifetime of debt, are putting off marriage and children – and consequently, will be inadequately prepared to financial support older generations as they age.

What if social security and pensions aren’t there when you need it? What if, even after being forced to pay for Obamacare, health care is adequate or even inaccessible?

At the individual level, this is a clear incentive to prepare, and attempt to build a self-sufficient life that is not reliant on social programs or future-promises of assistance and support.

Promote your own health, and that of your family, and create a back-up plan in case one’s position in the pecking order of society should slip and fall, income should fade or medicines and health care should become out-of-reach.

The same tips to prepare for an emergency can be applied to the long game to prepare for a future of bankrupt and inept social services.

via http://ift.tt/2hwBLa5 Tyler Durden

Another day, another market-moving tweet from Donald Trump.

Moments ago, the president-elect, following up on his recent spat with Lockheed over the F-35, which one week ago Trump said its “program and cost is out of control”, continued his crusade on over-budget government programs, when he tweeted that “based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!“

Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!

— Donald J. Trump (@realDonaldTrump) December 22, 2016

The immediate kneejerk response has been to send Boeing stock higher, while LMT has slide over 1% in the after hours, as Trump once again moves stocks with his tweets.

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

In what, for the past seven years, has been an upside-down investing world where the opposite of what financial and economic theory – and certainly consensus – suggests should happens with centrally-planned regularity, what better trading recommendation list than one focusing on the “Costanza Trades” for the year ahead.

Conveniently, that’s what RBC’s Mark Orsley has put together, so for those who know what the right trade is, and need just that little bit of confidence push to do the opposite, here it is…

2017 Costanza Trades

It’s that time of year.  Candy canes, holiday lights, and your inbox’s are surely cluttered with 2017 “Year Ahead” pieces.  I find it hard enough to accurately prognosticate just a week or two out in these markets so I find it amazing bank research teams can predict what’s going to happen over the next 12 months.  However, these pieces are useful in some regards as they are very good at nailing the consensus themes and are excellent counter indicators.  For example, a well-known, large investment bank across the street from us had 5 of their 6 “Top Trades of 2016” stopped out in the first month of the year.  Yikes.     

Long time readers will know The Macro Scan takes another twist at year end to present next year’s top “Costanza Trades.”   For those of you not familiar with George Costanza, his character on the sitcom Seinfeld could do no right when it came to employment, dating, and life in general.  In one episode, George realizes over lunch at the diner with Jerry that if every instinct he has is wrong; then doing the opposite must be right.   George then resolves to start doing the complete opposite of what he would do normally. He orders the opposite of his normal lunch, and he introduces himself to a beautiful woman that he normally would never have the nerve to talk to and says, “My name is George. I’m unemployed, and I live with my parents.” To his surprise, she is impressed with his honesty and agrees to date him! 

I find employing the Costanza method to trading an interesting exercise.  Ask yourself; what are the trades that make complete sense and all your instincts say are right, and then do the opposite.  Basically what you end up constructing is an out of consensus portfolio and we all know how consensus trades work out in this market. 

Employing the Costanza method can identify interesting, non-consensus trade ideas that could kick in alpha. 

Last year’s list of the top 10 Costanza trades produced 7 winners:

Last year’s Costanza trades:

• 1) Short Euro Stoxx:  small winner (-30bps, was down as much as 18% this year)
• 2) Long S&P’s: winner (+12%)
• 3) Short Dol/Yen: winner (-2.5%, was down as much as 17%)
• 4) Long Euro: X loser (-4%)
• 5) Short Euribors: X loser (+11bps)
• 6) Long Eurodollars: X loser (-17bps)
• 7) Long Oil: big winner (+41%)
• 8) Long Copper winner (+18%)
• 9) Long High Yield winner (+7%)
• 10) Long EEM winner (+9%)  

I can’t tell you how bad those ideas looked at the end of last year but it came through with an amazing 70% hit ratio!  Costanza was on to something so without further ado, here are the 2017 Costanza trades in no particular order, or the trades that all your instincts are probably saying are wrong:

2017 Costanza Trades:

• Short S&P’s
• Long UST’s/front end flatteners/short Breakevens (all really the same idea)
• Long EURUSD
• Short USDJPY
• Short USDCNY
• Long Gold
• Short Oil

Let’s go through each and assess the probabilities of the trade working (probabilities are purely off the cuff estimates for arguments sake)…

1.    Short S&P’s

This is about as consensus as you can get.  I saw a list of 17 sell side firms’ 2017 year-end targets and all 17 of them had bullish objectives.   The average target was 2366 with a 2350 median which would be roughly 4% higher than here (they really went out on a limb there).   Even some of the most well-known perma bears have capitulated bullish recently.     

Instinct: Trump will reflate the economy via tax cuts and fiscal stimulus; repatriated Dollars will go to share buybacks; there is still a high amount of cash on the sidelines and real money still is underinvested in equities. 

Costanza: there is no guarantee Trump will follow through and/or be able to institute any of his campaign plans; bonds are getting more attractive especially to pension funds that are closing their funding gap; geopolitical risks are rising.

Estimated probability of Costanza being right: 20% in 1H, 40% by year end.  This is so consensus that I am worried about being long.  That said; it is true that large asset managers who rotate their book about as quickly as the Titanic could turn have still not fully bought into this rally.  Therefore, if Costanza does prove right, it will probably be later in year once the rotation is complete.  We expect dips to be get bought very quickly in the beginning of the year. 

It is hard to argue with this bull trend in SPX…

Source: Bloomberg

* * *

2.    Long UST’s/front end flatteners/short breakevens

All three are essentially the same idea so let’s just combine it.  The fixed income market slowly started to sell off in the summer as Brexit risks faded and global growth improved.  Trump was the big kicker that got the reflation theme running on his pro-growth policies that will also lead to more supply.  That got rates, curves (2s10s), and breakevens all moving higher in tandem.  

The market is now very positive on forward growth and inflation prospects, and remains positioned for a more aggressive Fed as specs are still at or near record shorts in Eurodollars, Fed Funds, and 5yrs.  

Instinct: Trump will reflate the economy via tax cuts and fiscal stimulus; Fed to be more aggressive in 2017; foreign central bank selling; increasing long end issuance; potential for ECB and BOJ to taper

Costanza: there is no guarantee Trump will follow through and/or be able to institute any of his campaign plans; bonds are getting more attractive especially to pension funds that are closing their funding gap; geopolitical risks are rising; composition of the Fed shifting to more dovish; still yield seekers around; long-term demographics 

Estimated probability of Costanza being right: 50%.  I could actually see this potentially working out later next year.  If you look at the long-term chart of US 10yrs, there is the potential for a move up to 2.90% and still be in its long-term down trend that is probably largely due to the aging demographics of the US.  I have been arguing that we have witnessed a regime shift and all the reasons for the short trade instinctively make sense; improving growth/inflation even before the election, Trump stimulus plans, etc., but the sheer crowdedness of the trade should concern us all.  However, much like equities, there are still many large Real Money types that have long standing UST positions that need to be sold. This makes it a coin flip but I could see a move higher in rates first and then back into the long-term trend lower.      

US 10yr yields – 1986 to present – 10yrs have more room to run higher before finding its long-term down trend resistance…
Source: Bloomberg
 
Trade Idea -> One of my favorite Costanza trades entering the New Year is selling the EDH7/EDM7 spread around 19bps.  The market has priced in more than 2 hikes for next year which is approaching the Fed’s forecast of 3 hikes.  First of all, when has trading off the dot plot ever proved successful?  Secondly, I think pricing in 2.3 hikes in 2017 is about the most the market can do at this point considering we haven’t seen Trump implement any of his plans yet and there is a brewing trade war with China.  Not exactly positive for growth.  This plays for a less aggressive than expected Fed during a year the Fed becomes more dovish as three hawks gets replaced by three doves (note Trump can insert two additional member upon taking office).     

* * *

3.      Long EURUSD

The Euro/USD cross has mainly been driven by the Dollar side of the equation as interest rate differentials has moved in favor of the USD.   You could sprinkle in Italian Banking issues and general European political risk but it has really been about the Dollar this year.  

Instinct: interest rates in the US will keep moving higher widening the differential between Europe and the US taking the Euro lower. 

Costanza: growth has been pretty good in Europe; the slow ECB taper could start to move differentials back towards the Euro. 

Markit Eurozone Manufacturing PMI…

Source: Bloomberg
 
Estimated probability of Costanza being right: 30%. The central bank divergence theme is alive and well as the US remains in a tightening bias while Europe will be stuck keeping rates unchanged for 2017.  However, Costanza could win if Trump fails to boost growth and the Fed once again does not realize their dot plot.  So it is not impossible for the Euro to rally but the divergence theme should keep it under pressure once again next year.  Add in the political risks as there are elections in France where the Euro critic Le Pen has a somewhat legit chance of winning.  There is also elections in Germany were Merkel and her party will be in big trouble given the recent attacks in Munich allegedly by a migrant.  The political undertones in Eurozone are certainly not working in the Euro’s favor.  Lastly, the Euro just broke a major long-term trend support line.  I think we should stop talking about parity and start talking about 0.9000.  
 
EUR/USD – 2000 to present…

Source: Bloomberg

* * *

4.      Short USDJPY

This is a very similar idea to the Euro as interest rate differentials have pushed the Yen weaker versus the Dollar.  Clearly the Fed remains in its hike cycle while the BOJ is nowhere close to hiking so the only thing that can unearth this trade is if US monetary policy falls short of expectations.  Additionally, there is loose talk going around that Trump and Abe have struck a deal where Japan will fund Trump’s deficit spending and in exchange the US will allow Japan to depreciate their currency further.  It is a bit conspiracy theorist but also not a crazy idea.  The only push back is at some point (>125?), the Yen weakness hurts small businesses and importers, so would a 150 USDJPY really be that beneficial?  Up for debate but that idea has been thrown out there. 
 
Instinct: interest rates in the US will keep moving higher widening the differential between Japan and the US taking Dollar/Yen higher. 

Costanza: the market has priced in a more aggressive Fed so there is a lot of downside if the Fed proves to be more dovish than expected; the BOJ will taper; a chance the BOJ move away from NIRP

Estimated probability of Costanza being right: 30%. It really comes down to will the Fed live up to the hike hype.  The other Costanza arguments of abandoning NIRP and tapering seem like a stretch to me, but this is generally considered the most crowded Dollar long so on that alone Costanza could be proven correct.  Dollar/Yen is not quite yet realizing the same technical breakout as the Euro.

USDJPY – 1980 to present…

Source: Bloomberg

* * *

5.      Short USDCNY

Unlike the Euro or Dollar/Yen, this cross has been driven by both sides.  China has acted to devalue their currency to slow their economic decline and the US side has been driven by the reflation trade and more aggressive Fed expectations.  

Instinct: China will continue to keep their currency weak to stimulate growth; US reflation trade will keep US rates moving higher which keeps the rally in USDCNY going 

Costanza: China growth picking up reducing the need for a weak currency; China has recently tightened liquidity (thru HIBOR/SHIBOR) to stem the depreciation; the market has priced in a more aggressive Fed so there is a lot of downside if the Fed proves to be more dovish than expected

China Manufacturing PMI…

Source: Bloomberg
 
Estimated probability of Costanza being right: 40%.  I am going to give this one a little more of a chance.  I think most people are incorrectly assuming that growth in China is weak.  I am not saying there aren’t credit issues in the shadow banking system, but as you can see above, PMI’s are actually robust indicating an improved forward growth outlook.  Anecdotally, I don’t know one person or firm that has talk about putting on USDCNY downside.  This could actually be more of a consensus trade than S&P’s and thus warrants a higher probability of Costanza being right.     

* * * 

6.       Long Gold
 
Gold has been declining since Brexit risks faded over the summer and the depreciation really gained momentum once Trump won the election.  It is moving because real yields and the US Dollar have been rising which makes its 0% yield useless in this environment.

Instinct: US Dollar and real yields will continue to appreciate taking Gold lower.  

Costanza: Geopolitical risks are rising with US/China; inflation is picking up; the market has priced in a more aggressive Fed so there is a lot of downside if the Fed proves to be more dovish than expected
 
Estimated probability of Costanza being right: 30%.  I find the Costanza reasons to be weak.  Yes there are geopolitical concerns but they will get sorted out via trade wars not military wars.  Gold has not been a good inflation hedge, so that leaves only a disappointing Fed as the reason why it could go higher much like the Euro and thus the same probability.   Note that Gold is coming up on a very important long-term trend line.  

Gold – 2004 to present…

Source: Bloomberg

* * * 

7.      Short Oil
 
The OPEC and non- OPEC production cuts really changed sentiment.  It went from a global supply glut story to one of more balance if not slightly imbalanced if demand picks up as expected.  Specs have gotten very long, and now it is a matter of will OPEC member stick to the deal and will US Shale increase production at these more attractive levels?  

CFTC NYME Crude Oil Net Non-Commercial Futures Positions…

Source: Bloomberg

Instinct: OPEC and non-OPEC members will cut production as agreed to keep the market balanced; demand picking up

Costanza: OPEC deal will not live up to the agreed upon production cuts; US Shale production increasing; producers happy to hedge above $50; Dollar strength will put pressure on oil 

Estimated probability of Costanza being right: 60%.  I can see Costanza getting this one right.  While I think OPEC will more than likely keep the cuts as they said they would, this trade could work simply because US supply comes back online.  In fact, it is already happening.  The switch has been flipped on.   Additionally, this could be a very good sneaky Dollar long proxy.  How can oil keep rising if the Dollar is going to appreciate?

Permian Basin Rig Count is rising briskly…

Source: Bloomberg

WTI crude (black) vs. USD Index (inverted in blue) – note the divergence recently.  How can this persist? 

Source: Bloomberg

Conclusion

After writing this list, it amazes me how connected every single one of these ideas are and basically why the “probabilities” of each Costanza trade working are so similar.  There are always correlations but more so than any year I can remember, the macro themes are as interrelated as ever. Basically whether you are long stocks, long Dollar, short fixed income, or short Gold, you are betting that Trump’s policies will be introduced and implemented as stated.  I doubt that these plans will go through smoothly as we have already seen Trump fade on campaign pledges and some modest push back from the Republican leadership.   However, I think you will get bailed out on the simple fact that the reflation rotation has still not been completed by the large real money types.  It may not last all year, but it should continue in Q1 and we continue to think that any January correction in risk assets will get met with brisk buying. There are also some very good anti-risk trades which will offset your reflation trades that also won’t hurt much if the current trend continues like the EDH7/EDM7 flattener.

I want to thank everyone for their support this year and I wish you much success in 2017! 

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