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Last week, some readers were left wondering why, if the economy is as strong as the president is pretending it is (even though a leaked email from Donna Brazile revealed the truth behind the propaganda), did Gluskin Sheff strategist recommend unleashing a multi-trillion, “helicopter money” stimulus drop. The reason: we can officially close the book on the “bullish” Rosie and welcome back the old, grizzled, much more familiar version of the former Merril Lynch strategist: one bearish enough that the following litany of indicators that are “flashing red” for a late cycle economy, brings us back in time to some of his vintage pre-crisis writing.

Courtesy of the Financial Post, here is David Rosenberg explaining why “all signs are flashing this market is ‘late in the game’”

* * *

Late in the game: that is precisely where we are. And it’s not even an opinion any more. It is a market fact.

The TSX has not made a new high in over two years and it has been 17 months for the broad NYSE Composite stock index.

The yield curve is flattening. Leading economic indicators are sputtering.

Uber-tight credit spreads and ultra-low cap rates in real estate serve as confirmations of late-cycle pricing.

Traditional valuation metrics for equities are every bit as high if not higher than they were in the Fall of 2007.

We are well past the peak in autos and just passed the peak of the housing cycle.

Not just that but the broad measures of unemployment have stopped going down as well.

And the mega Merger Mania we are seeing invariably takes place at or near cycle peaks, as companies realize that they can no longer grow their earnings organically. We have just witnessed five multi-billion dollar deals this past week alone — $207 billion globally (AT&T/Time Warner; TD Ameritrade/Scottrade) in what has been the most active announcement list since 1999 … what do you know, near the tail end of that tech bull market too.

We also were at the receiving end of a really disappointing consumer confidence report out of The Conference Board — sliding to a three-month low of 98.6 in October from 103.5 in September, the sharpest slide of the year.

And it wasn’t just the politics or gas prices — just a general malaise.

Assessments of business conditions now and perceptions for the next six months deteriorated significantly, as they did for the jobs market and spending intentions for homes and appliances.

This sentiment index generally peaks between 60% and 70% of the way through the cycle and so if that traditional pattern holds for this one, it would mean bracing for a recession to start any time from October 2017 to May 2018.

Forewarned is forearmed.

There also is this little issue of excess valuations, as ‎in the 24x price-to-earnings multiple on reported GAAP earnings which is about 40% “rich” compared to the norm of the past 80 years.

On top of that, we have twice as many bulls as bears in the sentiment survey data.

That said, there is not the same level of euphoria as there usually is at the top of the market, and this is reflected by the wave of mutual fund redemption in equities for much of this year and the fact that global portfolio managers are sitting tied for the highest cash ratios of the past 15 years.

So while cautious, the lack of extreme bullishness is actually a good thing and suggests that whatever correction or even bear market we see, the selloff should be limited and no, it will not look anything like 2008/09.

That said, having cash on hand, reducing the beta of the portfolio, focusing on the running yield, and stepping up in quality across the capital structure, are all going to pay off in terms of preserving the capital and generating decent mid-single digit net returns at the very least. That’s with a view towards allocating the dry powder at better price levels that will allow for a return to high-single digit or even double-digit returns once the dust settles.

What is important to know is that the backdrop is one of late cycle. Most of the patterns, both in the realm of financial assets and the real economy, are flashing this signal — one of a very mature market.

Now, I am not sure if this is the seventh inning, or the ninth, but it is likely somewhere in between. That’s important to know — we are not in the third or fourth, let alone the first or second. And even in the seventh, we still have to get out of our seat and stretch.

That does not mean a stretch for risk — it actually means dialing in the risk, at the margin.

It isn’t just the valuations and the heightened political risks in the U.S. and throughout Europe, or the recent slate of soft macro data for the most part. It also is about what the corporate sector is flagging about how much more growth there is in this economic cycle, having celebrated its seventh birthday four months ago.

What I’m referring to specifically is Kimberly-Clark’s financial results for the latest quarter, which surprised to the downside and the company also cut its sales guidance for the year (for which the stock price was clocked with a 4.7% loss on the news).

So I have to say that if this classic consumer staple giant, who makes Huggies diapers and Kleenex tissue, can’t grow these basic goods, what does it say for consumer goods and services that are truly discretionary in nature?

This does not at all bode well for the coming holiday shopping season, and if you have looked at the payroll data in recent months, the retailers are expecting some nice tidings. They may be in for a rude surprise.

This is the environment where the Fed is choosing to raise rates, which is incredible. The futures market is still priced for a near-70% chance of a December move. The two-year U.S. Treasury note auction yesterday went quite poorly (the bid-cover of 2.53x was the second lowest since December 2008) and the yield backed up to a four-month high of 0.85%.

We’ll see how brave the Fed will be — we know what happened last year after the Fed went and for two or three months, it wasn’t a pretty picture.

Now New York Fed president Bill Dudley did say that he would like to raise rates again before year-end but caveated that with “… subject to the economy continuing to evolve in line with my expectations”.

Well, if his forecast is aligned with the median on the FOMC, then implicitly he is expecting 3% real GDP growth for the fourth quarter. Good luck with that (a number we have not seen materialize in two years).

One thing is certain: if the Fed does raise rates at the short end, we may well end up seeing yields decline further out the curve — as we did following last year’s rate hike.

Classic. This is what happens when the Fed starts to tighten into the eighth year of the cycle and into the slowest-growth-year of this elongated expansion.

We also have this ongoing “conundrum” (as Alan Greenspan once put it) of there being a global savings glut (at a time when the world’s central banks have taken $18 trillion of “safe yield” onto their balance sheets and out of the hands of the general investing public).

In fact, the authors of a report commissioned by the Council on Foreign Relations said that the global savings “glut” has reached epic proportions. The volume of inflow of savings from abroad into U.S. securities totalled an eye-popping $750 billion in the past two years — $500 billion of which was diverted to Treasuries and Agencies, as America played the role (and still does) as the world’s smartest kid in summer school when it comes to delivering positive yields on AAA-rated paper.

What this leaves us, therefore, is the prospect of a continued flattening of the yield curve. Again, classic late cycle development.

Now you will hear cries from many circles to ignore the yield curve, it has lost its edge as a leading indicator due to all sorts of reasons, mostly related to central bank interventions. Don’t believe them.

Back in 2000, the experts said to ignore the yield curve — it is irrelevant in a Dotcom world. Wrong.

In 2007, the gurus also said to ignore the yield curve in a world of abundant credit.

It still matters, and if we were to get the same response this time to the Fed as we did just over a year ago, we would then be two, maybe three more hikes away from a complete inversion of the Treasury curve.

Maybe it has lost some of its predictive power, but it has called each of the last 10 recessions of the post-World War Two period with precision. So I wouldn’t exactly abandon it just yet.

David Rosenberg is chief economist and strategist at Gluskin Sheff + Associates Inc. and author of the daily economic report, Breakfast with Dave. Follow David and his colleagues at http://twitter.com/gluskinsheffinc

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Submitted by Darius Shahtahmasebi via TheAntiMedia.org,

More than 80 human rights groups and other related non-governmental organizations have called on the United Nations to drop Russia from the U.N. Human Rights Council over its military campaign in Syria.

The groups, which include Human Rights Watch, CARE International, and Refugees International, signed an appeal that was launched ahead of the upcoming elections to fill 14 seats on the 47-nation council.

Given the media’s ongoing narrative against Russia’s bombardment of eastern Syria, the call to pull Russia from a council dedicated to human rights may be a well-founded request.

However, one should bear in mind that Saudi Arabia is also a member of this Council. Saudi Arabia is responsible for a recent assault on a Yemeni funeral that killed over 140 civilians and injured over 500 others. The aftermath of the attack was aptly described as a “lake of blood.”

China is a member of this U.N. Human Rights Council. Indonesia is a member of this Council. Though it isn’t often reported by the mainstream media, Indonesia has brutally repressed the people of West Papua simply because a mining company based in West Papua pays the Indonesian government a heap of tax (their biggest taxpayer). Though the West Papuan people have attempted to rise up against Indonesia’s occupation of their country, the Indonesian military suppresses their attempts simply to preserve their tax revenues and protect the interests of the very powerful mining company.

Given that the rest of the Council members’ atrocities are overlooked by these so-called human rights organizations, the motives of these groups should be called into question.

So what is really at play here? Is it the case that these NGOs are deeply concerned with human rights and have therefore drawn the line at Russia’s military campaign in Aleppo? Or are these groups acting as the mouthpieces of their respective governments and donors, including wealthy human rights abusers such as Saudi Arabia?

Unfortunately, the case against the motives of groups such as Human Right Watch’s was made over a decade ago. Anti-War released an article in September of 2001 that seriously called into question the objectives and the funding behind Human Rights Watch:

“For a century there has been a strong interventionist belief in the United States – although it competes with widespread isolationism. In the last 10 years, attitudes have hardened: human rights interventionism is becoming a consensus among the ‘foreign policy elite.’ Human Rights Watch itself is part of that elite, which includes government departments, foundations, NGO’s and academics. It is certainly not an association of ‘concerned private citizens.’ HRW board members include present and past government employees, and overlapping directorates link it to the major foreign policy lobbies in the US. Cynically summarized, Human Rights Watch is a joint venture of George Soros and the State Department.” (emphasis added)

Further, NGO Monitor found that in 2009, Human Rights Watch held a fundraising dinner in Saudi Arabia, using their alleged anti-Israel bias to solicit funds from prominent Saudis. Human Rights Watch has actually been critical of Saudi human rights abuses for years, including the treatment of women, the justice system, basic freedoms, and its treatment of Yemen — yet  HRW has no problem soliciting funds from them.

Not to mention the fact that George Soros gave a grant to Human Rights Watch of $100 million in 2010. (Don’t know who George Soros is? Click here.)

Putting Saudi Arabia, a country with a long history of human rights abuses, in the same sentences as “fundraising dinner” and “Human Rights Watch” should tell one something about the dedication these groups truly have towards human rights.

No one is going to miss Russia on a human rights council. But if these groups were impartial and truly cared about human rights, the appeal they signed would call for the removal of more than just Russia given the list of human rights abusers that currently sit on the Council.

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We have written frequently in recent weeks about a feud that erupted between Chelsea Clinton and Doug Band back in 2011 after Chelsea raised concerns about potential conflicts of interest between Band’s firm, Teneo, the Clinton Foundation and the State Department (see here, here, here and here).  The feud ultimately resulted in Band being forced to draft a memo spelling out, in vivid detail, the many entangled relationships between himself, Teneo, the Clinton Foundation and the State Department.  Fortunately, today’s Wikileaks dump included that memo which reveals, for the first time, the precise financial flows between the Clinton Foundation, Band’s firm Teneo Consulting, and the Clinton family’s private business endeavors.

The memo starts with a brief background on Teneo, which was created in June 2011, shortly after Declan Kelly resigned from his position as “United States Economic Envoy to Northern Ireland,” a position to which he was appointed by Secretary Clinton.

In June 2009, DK Consulting was founded by Declan Kelley.   Mr. Kelly served as COO of FTI Consulting until June 2009, when he stepped down and established DK Consulting.  At that time, he also became the United States Economic Envoy to Northern Ireland.  Pursuant to the terms of his exit agreement with FTI and consistent with the ethics agreement of his uncompensated special government employee appointment at the State Department, Mr. Kelly retained and continued to provide services to three paying clients (Coke, Dow, and UBS) and one pro bono client (Allstate).  In late 2009, Declan retained me as a consultant to DK Consulting to help support the needs of these clients.

 

In May 2011, Mr. Kelly resigned his Envoy position at the State Department.  In June 2011, Mr. Kelly and I founded Teneo Strategies; simultaneously, Mr. Kelly closed DK Consulting and shifted its clients to Teneo.

 

Throughout the past almost 11 years since President Clinton left office, I have sought to leverage my activities, including my partner role at Teneo, to support and to raise funds for the Foundation. This memorandum strives to set forth how I have endeavored to support the Clinton Foundation and President Clinton personally.

In a subsequent section of the memo entitled “Leveraging Teneo For The Foundation,” Band spells all of the donations he solicited from Teneo “clients” for the Clinton Foundation.  In all, there are roughly $14mm of donations listed with the largest contributors being Coca-Cola, Barclays, The Rockefeller Foundation and Laureate International Universities. 

 

The donations from Dow Chemical are particularly notable for several reasons.  First, because of other emails revealed by WikiLeaks and other FOIA requests, we now know that Dow Chemical CEO, Andrew Liveris, was granted special access to then Secretary Clinton back in July 2009 at the same time he was embroiled in ongoing litigation with another Clinton Foundation donor, Kuwait, over a failed joint-venture that would have netted Dow $9BN in cash.  As Band notes in his memo, 1 month after being granted special access to Secretary Clinton, Liveris invited President Clinton and Band out for a day of golf.  Moreover, shortly after his meeting with Secretary Clinton and golf outing with President Clinton, Liveris decided to donate $500,000 to the Clinton Global Initiative…very convenient timing for all involved.

In August of 2009, Mr. Kelly invited Mr. Liveris to play golf with President Clinton and me.   Mr. Kelly subsequently asked Dow to become a CGI sponsor at the $500,000 level, which they did, as well as making a $150,000 donation to the Foundation for President Clinton to attend a Dow dinner in Davos.

The story gets even more bizarre when Band reveals in the following footnote that Liveris provided the Dow Chemical plane to fly President Clinton and his staff from New York to California and then California to North Korea for their golf outing.  We would assume this is a simple typo by Band and/or he’s just geographically challenged…if not, this certainly raises a whole other set of questions for Bill.

Mr. Liveris provided the Dow plane to fly President Clinton and his staff to and from California for our trip to, and from, North Korea.  As a private trip, the Foundation had to pay the costs of airfare; Mr. Liveris’ in kind contribution saved the Foundation in excess of $100,000.

According to the Dialy Caller, Dow Chemical paid Teneo $2.8 million in 2011 and $16 million in 2012 for a variety of “consultancy services”.  Of course, Bill Clinton was an honorary chairman of Teneo and, as such, was set to be paid $3.5 million for that position even though he ultimately only kept $100,000 because of the scandals that erupted around the firm, including their advisory relationship with MF Global.

Finally, Band also offers the following commentary on the “$50 million in for-profit activity” he was able to secure for Bill Clinton (as of November 2011) as well as the “$66 million in future contracts, should he choose to continue with those engagements.”

Independent of our fundraising and decision-making activities on behalf of the Foundation, we have dedicated ourselves to helping the President secure and engage in for-profit activities – including speeches, books, and advisory service engagements.  In that context, we have in effect served as agents, lawyers, managers and implementers to secure speaking, business and advisory service deals.  In support of the President’s for-profit activity, we also have solicited and obtained, as appropriate, in-kind services for the President and his family – for personal travel, hospitality, vacation and the like.  Neither Justin nor I are separately compensated for these activities (e.g., we do not receive a fee for, or percentage  of, the more than $50 million in for-profit activity we have personally helped to secure for President Clinton to date or the $66 million in future contracts, should he choose to continue with those engagements).

 

With respect to business deals for his advisory services, Justin and I found, developed and brought to President Clinton multiple arrangements for him to accept or reject. Of his current 4 arrangements, we secured all of them; and, we have helped manage and maintain all of his for-profit business relationships.  Since 2001, President Clinton’s business arrangements have yielded more than $30 million for him personally, with $66 million to be paid out over the next nine years should he choose to continue with the current engagements.

A big part of those “for-profit” activities was a $3.5mm annual payment from Laureate…

…and millions in speaking fees arranged by Band.

 

With that, we look forward to Donna Brazile’s explanation of how this is all just an attempt to “criminalize behavior that is normal.”

 

The full memo can be viewed here:

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Submitted by Simon Black via SovereignMan.com,

Below is a short email that my friend Sam posted this morning to his Facebook page about his surprisingly positive experience with the US healthcare system.

I thought it a fantastic read, and I wanted to pass it along to you:

I had to run to the emergency room today for what may be a neurological issue. Dizziness, staggering, loss of balance, that kind of thing.

 

I’m in San Diego, one of the most expensive cities in the world, and I have no insurance. I figured I was screwed.

 

But instead, the experience was unreal.

 

I got seen immediately. I didn’t even have time to sit down, they just whisked me into an examination room.

 

The doctor and nurse were ON IT, and they took their time with the exam and consultation.

 

The visit ultimately involved staying the whole day for observation, all kinds of tests, sedation and reversal, blood pressure check, a full blood panel work up (results tomorrow, yes TOMORROW keep your fingers crossed) and having both ears cleaned and flushed.

 

The bill was a mere $374.63.

 

Do I have some insane insurance plan? Nope.

 

Am I being super-subsidized by the rest of America? Nope.

 

Am I a privileged politician with a special “bosses only” healthcare plan? Don’t make me laugh.

 

It turns out that the care was for my dog, not for me. And we didn’t go to a ‘people’ hospital– I obviously took my dog to an animal hospital.

 

She and I are both biological machines, mammals made mostly of water (though she sheds more than I do).

 

The only other real difference is that the government is regulating the hell out of healthcare for people, while (relatively speaking), leaving healthcare for animals alone.

 

And that, my friends, is the reason Obamacare has flopped, and why your healthcare costs will keep going up.

 

It’s not greed. It’s not the drug companies. It’s not anything other than the application of government intervention in what should be a free market.

Simon again.

It’s not exactly controversial these days to suggest that the US healthcare system is in bad shape.

According to data collected by numerous independent agencies like the Institute of Medicine, Commonwealth Fund, and Kaiser Family Foundation, the US still ranks dead last among advanced economies in overall quality of its healthcare system.

In fact, the US healthcare system has the worst record in the number of deaths caused by mistakes or inefficient care.

And wait times in the US for urgent care and primary care visits rank lower than every other developed nation.

Americans pay at least 50% more for healthcare in terms of annual spending than people in other advanced nations, yet they receive less care as measured by the number of doctor visits.

Sure, it’s great that there are fewer uninsured people than ever before in the US, but this is a measure of QUANTITY, not a measure of QUALITY.

Undoubtedly the US is home to some of the finest medical professionals in the world.

But they’ve been buried under an expensive, over-regulated bureaucracy that continues to erode overall quality in the system.

A 2015 report from the National Academy of Sciences summed it up by stating, “For Americans, health care costs and expenditures are the highest in the world, yet health outcomes and care quality are below average by many measures.”

But instead of trying to understand WHY the system is so slow, bureaucratic, and expensive to begin with, politicians try to ‘fix’ it by creating more regulations.

It’s as if they believe they can legislate their way to a quality, efficient medical care system, just as they believe they can legislate their way to a better education system or economic prosperity.

This almost never works.

After all, the people who come up with these rules are notoriously unqualified and have rarely ever held a job outside of their giant government bureaucracy.

So despite what may be some very good intentions to fix the system, they invariably make things worse.

The end result is that your pet probably has access to more efficient healthcare than you do.  Do you have a Plan B?

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The choice…

 

Source: MichaelPRamirez.com

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By Chris at http://ift.tt/12YmHT5

Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.

Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.

Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.

Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.

In this week’s edition of the WOW we’re covering the death of active investing (or not)

Scan the financial news today and amongst the rubble 3 things stand out.

1. US politics is now officially at the top of the fruit-bowl after entering banana republic territory.
2. Sadly what happens to Kim Kardashian, who as far as I can tell is famous for being famous, is more important than wealth inequality, the demographic timebomb, unfunded pensions, and (amazingly) the headache I got after seeing her on Bloomberg. Yes, really.
3. Active investing will blow away in the winds of history, replaced by passive strategies. Yup, it’s over, folks. Thanks for playing.

It is the 3rd point that we lend our eye to here today.

But first let me state my bias up front. It’s important for you to know so you can critique objectively – something we should all do.

Many many of my friends and colleagues manage money (some of them godawful amounts of the stuff), and many of them have been facing redemptions over the past few years with this year 2016 being the worst yet.

The WSJ recently ran an article about the dying business of picking stocks:

A few months ago Perry Capital closed its doors after losing over half of its capital to redemptions. As reported by Bloomberg:

“The closure is the latest — and almost certainly not the last — in what is shaping up to be the biggest shakeout in the $2.9 trillion hedge fund industry since the financial crisis.

London-based Nevsky Capital closed its doors, citing fewer money-making opportunities because of the emergence of computer-driven strategies and index funds. Tudor Investment Corp. dismissed about 15 percent of its workforce in a shakeup in August. And Brevan Howard Asset Management plans to stop charging existing clients management fees on any new investments they make in two of its hedge funds, according to a person with knowledge of the matter.”

In yet another Bloomberg article:

“About 530 funds were liquidated in the first half, on pace for the most shutdowns since 2008.”

Bruce Berkowitz, one of the most successful managers in his field and the CIO of Fairholme Capital, is down from $20 billion to $2 billion in a decade! Across the spectrum actively managed mutual funds are down a stunning 79% from 10 years ago.

What’s Happening?

Where has the money moved to? One word: passive.

Index funds have much lower fees than active funds and so I can see the appeal. And besides, hedge funds as a group haven’t outperformed the US stock market since 2008.

The thing is since 2008 the Fed and global central banks have owned the market. It’s no wonder that some of the most talented money managers on this ball of dirt have underperformed the market.

————————————–

————————————–

The question is, is the market right?

Well, the market is always the final arbiter and we have to acknowledge this but in a word, no!

There are two main reasons for that:

Reason 1

Return is only one part of the equation. Risk is its ever present bedfellow. A bedfellow that precious few retail investors understand until they receive a punch to the gut.

Asset managers have a duty to protect capital. This means avoiding risk. So what if an index ETF is beating a fund? How many investors are asking the question why? Clearly not many.

Let me ask you a question. What was widely considered the most stable consistent and safe asset class in 2006?

You’re looking at the iShares US Real Estate ETF (IYR). It was THE worst place to be in the coming years.

From a high of 92.5 to 22.21 in a little over 12 months it provided passive index investors what is commonly referred to as a wipeout. But you can’t get angry at it. It’s just a dumb index doing what it’s meant to do.

Now I’m trying to think of just one of my friends or colleagues who was long US real estate in 2006 and 2007 and I can’t think of one. Most, including myself, never profited from the collapse but then again we didn’t get wiped out either. Did my hedge fund buddies get ridiculed in 2006 for not being long real estate? Of course. But if something doesn’t make any sense it pays to stay away.

If you’ve got a good money manager (and there are some awesome ones out there), then you’re paying them for risk adjusted returns.

Reason 2:

Money managers face a tough choice (and it’s a choice you as a private investor don’t have to worry about): they have to report their quarterly numbers. And if those numbers don’t beat the benchmark, they face redemptions.

In today’s fast moving world investors’ time horizons have narrowed. Like 10-year old Johnny Snot Nose, yet to develop the skills of patience, they want results and they want them now.

This dynamic has forced many money managers to take risks which they really shouldn’t be taking, stepping further down the risk curve in order to at least match the benchmark. It’s understandable but also daft.

What do you do when the overall indexes are beating you but you see the inherent dangers in the market and refuse to participate, preferring to protect your capital, going to cash, and avoiding overpriced assets?

Well, now we’re finding out as investors shun even the best active money managers in favour of “passive investing”.

A Bubble Forming

I recently had a conversation with a part-time investor who is managing his money and trying to do it himself. He was buying ETFs because of the low fees, and since they provide him exposure to pretty much any asset class he felt they made sense. All good, except it was a mess when we began to dig deeper.

He’d been buying leveraged ETFs, specifically NUGT which is the 3x leveraged gold shares ETF. I warned about these last week when suggesting to never invest in these horrible things. He bought a healthy chunk in May of 2016 and since GDX (the gold miners index) is essentially flat from the time of his purchase he couldn’t understand why he had lost money.

The second thing he’d been doing was he’d bought a half dozen bond ETFs for “safety”. When we discussed it he felt that because he owned the big five he was diversified. Now buying sovereign bonds at the tail end of the debt super cycle impresses me as insane and you’re not even compensated for the risk!

The other thing he’d been doing, as a hedge against potential market volatility, was to buy a couple of low volatility ETFs. Oy vey!

In short, his portfolio was sporting so much risk it made my head spin.

In the last 5 years over $50 billion has flowed into low volatility ETFs, distorting the stocks they comprise.

Mark Yusko, the founder and CIO of Morgan Creek Capital recently exposed the insanity of what’s going on here (and it’s also something Chris Mayer and I discussed recently in a podcast).

The assets which are included in many of the ETFs have been heavily skewed by dumb money coming in. Yusko pointed out Exxon Mobil (XOM) which historically has a P/E of 12 but now trades at 35x earnings. Why? Because it’s part of an ETF that is on the flip side of all those liquidating hedge funds. Dumb money.

Spectacular!

I can’t wait to see this one play itself out. It’s going to be more fun than watching Trump and Hillary in a cage fight, which I dare say would be the highest grossing reality TV in history and the one and only reality TV show I’d actually watch.

What Next?

Less money men is a good thing. And though many (like those mentioned above) are being thrown out with the bathwater, I don’t see this as being much more than yet another consequence of an extended period of gross mispricing of assets by our monetary overlords.

Howard Marks famously said that the cure for high prices is high prices, and the cure for low prices is low prices.

The hedge fund industry has over the years attracted billions of capital and whenever money flows into a sector we bipeds follow it. Many of those who came to managing money probably should never have been doing so but instead gone into growing marijuana, or making Yorkshire puddings, or farming chickens. Whatever, they shouldn’t have been managing money. Now many of them are going to do just that. I look forward to a bubble in Yorkshire puddings.

Passive money is a ludicrous concept. Money is not passive. Your attitude to it may be but it is and always will be dynamic. And so sticking money blindly into index funds and ETFs is almost as daft as it is giving it to your government. Almost!

John Hussman, CIO of Hussman Funds put it succinctly:

“Passive returns look glorious in the rear-view mirror precisely because Fed-induced yield-seeking speculation has driven nearly every asset class to rich or obscene valuations in recent years.

 

But investors should understand that risky securities do not, over time, persist without risk premiums. Indeed, neither aggressive Fed easing nor low interest rates has historically supported stocks during periods when, for whatever reason, investor preferences shift toward risk-aversion.

 

This lesson should have been drawn from the 2000-2002 and 2007-2009 collapses. The same lesson is likely to be taught again shortly, as we infer increasing risk-aversion among investors based on deteriorating uniformity and increasing dispersion across market internals. The immediacy of our concerns would ease in response to a material improvement in those internals.”

I fear we’re about to find out how smart “smart beta” really is. When the inevitable happens and Bob and Mabel, together with their millennial grandkids, Peach and Cloud, lose their shirts there’ll be no-one there to explain to them, “sorry, snowflake but did you realise that over half of the index you bought was sporting P/E and P/B ratios that have only existed a couple of times before?”

Remember, the 1929 crash took 30 years on an inflation adjusted basis to get back to breakeven. Passively investing in indexes at what looks like the eve of a systemic market shift may well prove the value in active investing.

Question

Cast your vote/leave your comment here and also see what others think

Know anyone that might enjoy this? Please share this with them.

Investing and protecting our capital in a world which is enjoying the most severe distortions of any period in mans recorded history means that a different approach is required. And traditional portfolio management fails miserably to accomplish this.

And so our goal here is simple: protecting the majority of our wealth from the inevitable consequences of absurdity, while finding the most asymmetric investment opportunities for our capital. Ironically, such opportunities are a result of the actions which have landed the world in such trouble to begin with.

– Chris

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” — Benjamin Graham

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Submitted by Darius Sahtahmasebi via TheAntiMedia.org,

As Russia and the United States approach arguably the most dangerous crossroads in history — and as Western media continues to crucify Russia for its actions within Syria — a closer look at the rationale Putin used for intervening in the Syrian war paints a sane explanation of how we ended up at this juncture of a global conflict.

Unsurprisingly, the explanation comes from the Russian president himself and was actually offered over 3 years ago. As expected, the Western corporate media and the Obama administration chose to ignore Vladimir Putin’s explanation for Russia’s stance on Syria and continued a number of policies that have completely exacerbated the conflict.

In a live interview with RT in June 2013, Putin was asked for an explanation regarding Russia’s support for Bashar al-Assad in Syria, even though this support has made some people very angry at Russia. Putin’s response was that Russia does not support the Assad government or Assad himself, but before defining Russia’s official position, he explained what Russia does not want to do within Syria or across the Middle East:

“We do not want to interfere into the internal schism of Islam, between Shias and Sunnis. These are internal issues of the Islamic world. We have very good relations with much of the Arabic world, Iran for example, and others.”

However, according to Putin, what worries Russia can be identified by having a look “at what is going on in the Middle East in general.”

“Egypt is not calm. Iraq is not calm – and it is not assured in its continued existence as one state.  Yemen is not calm; Tunisia is not calm. Libya is witnessing inter-ethnic, inter-tribal conflict. So the entire region has been engulfed, at a minimum, into a state of conflict and undecidedness. And now Syria, down the same path.”

In Putin’s eyes, these events are no accident. As he puts it, these events happened for a reason:

“Some people, from the outside, think that if they can ‘comb’ the region to how they see fit – some of them call this ‘democracy’ – then the region will come into calmness and order. That’s not how it is.  Without taking into account the history, the traditions, religious particularities, you must not do anything in the Middle East, especially as an outsider.”

Russia found this out the hard way when its military intervened in Afghanistan in the 1980s, a war many historians believe to be one of the main reasons for the fall of the Soviet empire. According to Robert Gates, director of the CIA under Ronald Reagan and George H.W. Bush and Secretary of Defense under both George W. Bush and Barack Obama, the U.S. began arming and funding jihadists in Pakistan and Afghanistan six months prior to the Soviet invasion with the express goal of luring the Soviets into a quagmire.

Similarly, and not by accident, the tactic used to draw Russia into Afghanistan is the same tactic being used today in Syria. In fact, Obama warned Putin that Russia’s adventures into Syria would result in the same quagmire the Soviets met in Afghanistan.

Unsurprisingly, supporting radical militant groups to overthrow regimes in the Middle East has been a key hallmark of Obama’s foreign policy. As Putin notes:

“So they interfered in the internal affairs of Libya. Whether the [Gaddafi] regime was good or bad – but Libya used to have the highest standard of living in the Middle East. And what’s happening there now? There’s a war for resources; an endless inter-tribal war. How is this all going to end – nobody knows.”

What happened to Libya resonated strongly with Russia due to the fact that in that situation, the West convinced Russia and China not to use their veto power at the U.N. Security Council level — they were told regime change was not part of NATO’s agenda in Libya. As it turned out, however, this was one of the first things that happened as soon as authorization was granted for NATO to bomb Libyan territory. Putin immediately questioned why NATO was attacking Muammar Gaddafi directly despite their promises they would not do so.

Putin has therefore drawn the following conclusion:

“What worries us is that if the same is done in Syria, then it will be in the same state as Libya. Is it not enough that we already have a small lawless territory between Afghanistan and Pakistan? Nobody governs the area, it’s just groups of rebels. This is very close to our borders, do we want another?”

The role of al-Nusra in the Syrian conflict continues to be the main issue today, as Russia has repeatedly asked for the United States to differentiate between terrorist groups and moderate groups on the ground in Syria.

As Putin said:

“You know what [the Americans] can’t answer us? The key armed opposition group…al-Nusra…Yes, this organization is one of the key ones in the armed opposition [against Assad]. The U.S. State Department has confirmed it is a terrorist organization linked to al-Qaeda. Al-Nusra does not hide that fact. And – what are [the Americans suggesting]? For al-Nusra to be in the future parliament?”

 

“Or, here’s another example. They support certain organizations that are fighting against Assad in Syria, yet those same countries [who support them in Syria] fight against these organizations in Mali.”

Putin’s reference to fighters in Mali is a direct attack on France’s role in the war on terror. France has been actively bombing Mali since 2013, though this is rarely covered by the mainstream media. As Russian Foreign Minister Sergei Lavrov has noted, the fighters France supported in Libya to overthrow Gaddafi were the same fighters they have supposedly been fighting in Mali.

“Often, not only are they the same organizations – they are the same individuals,” Putin added.

 

“They simply leave Syria and go to fight in Mali – where western states do not support them. Then the same people go back to Syria and there they are supported.”

 

“Where is the logic? How will it all end? These are not just empty words.”

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The RNC today filed two lawsuits in federal court alleging that the State Department is intentionally “stonewalling” in refusing to respond to requests from the National Archives for email records of various State Department staffers, including the now infamous Bryan Pagliano.  As most are aware by now, Pagliano’s emails during his tenure at the State Department, like many of Hillary’s, mysteriously went “missing” after the private email server scandal blew up early last year.  According to Law News, the National Archives and Records Administration (NARA) sent a request to the State Department back in July 2016 to produce Pagliano’s emails but the RNC says there has been no response to date claiming an obvious attempt to “stonewall” until after the election.

Documents obtained by ABC News reportedly show the National Archives sent a request to the State Department in July that asked for an explanation about the lack of emails from Clinton’s top IT aide Bryan Pagliano. The State Department was asked to respond to the request within 30 days, but more than three months has now passed without a response.

 

“The State Department is clearly stonewalling another federal agency’s efforts to recover the emails of the IT staffer who set up Clinton’s illegal server and was granted immunity by the FBI,” Priebus said to ABC News. “If this isn’t an Obama Administration cover-up to protect Hillary Clinton, I don’t know what is.”

 

The RNC chairman argues the failure to respond to the request could be grounds for the Department of Justice to initiate an investigation into what happened to the emails.  If Pagliano destroyed the records — and Preibus seems to think he did — he could be prosecuted for the destruction of federal records.  Although, it is important to note that Pagliano did receive immunity for his cooperation in the FBI’s investigation into Clinton’s use of the private server.  And while the scope of the immunity agreement is currently unknown, Preibus does not believe the DOJ would’ve given Pagliano blanket immunity for the intentional destruction of federal records.

 

Of course, the State Department simply asserts that they can’t find a single email received or originated by Pagliano during Hillary’s tenure as Secretary of State…which seems completely reasonable.  But, as State continues, that doesn’t necessarily indicate that Pagliano intentionally destroyed federal records in an obvious attempt to coverup mass corruption at the State Department and FBI because “employees’ emails have not always been automatically retained.”   

State Department spokesman John Kirby offered no explanation to the network for why the deadline was missed.

 

“As we have publicly explained months ago, the Department has searched for Mr. Pagliano’s email pst file and has not located one that covers the time period of Secretary Clinton’s tenure,” Kirby said. “As we have also previously explained, employees’ emails have not always been automatically retained, so the absence of this email file does not necessarily indicate that Mr. Pagliano intentionally deleted his emails.”

 

Kirby’s comment focuses on the State Department’s failure to locate Pagliano’s emails, but it does not address the entirety of the National Archives request.  For example, the request said “if it’s determined Federal records have been alienated or destroyed, please describe all measures your agency has taken, or expects to take, to retrieve the alienated records or retrieve them, to the extent necessary and appropriate.”

As most will recall, Pagliano was the first to receive an immunity deal from the FBI which many speculated, at the time, implied that the FBI was close to bringing official charges against Hillary.  Now, of course, we know that Pagliano and at least 4 other people linked to Hillary’s email scandal, were more likely granted immunity as part of what appears to be a massive cover-up operation by the FBI and DOJ. 

Pagliano was also the first to “plead the 5th” rather than testify before a congressional panel and, thanks to a WikiLeaks data dump earlier this week, we now know exactly how Neera Tanden felt that decision: 

 

Yes, “suboptimal” indeed…but don’t worry because:

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Submitted by Matthew Vadum via Lifezette.com,

While the mainstream media has been working day and night promoting Hillary Clinton’s candidacy, it has largely ignored or downplayed violent attacks against supporters of Donald Trump.

But assaults on Trump supporters appear to be growing increasingly common as Election Day approaches and tensions intensify. Reports of Trump lawn signs and banners being stolen and defaced are everywhere on social media.

Making matters worse, undercover video evidence emerged showing senior Democrat operatives Robert Creamer and Scott Foval acknowledging using dirty, likely illegal tricks against the Trump campaign. Their goal was to generate negative media coverage of Trump rallies by fomenting violence at them. The media eagerly used the various fisticuffs and melees the Democrats created to attempt to discredit Trump by depicting his supporters as violent, knuckle-dragging crazies.

The videos, shot by ACORN slayer James O’Keefe’s group Project Veritas Action, show Foval on camera saying his agents “infiltrate” Trump events. “It doesn’t matter what the friggin’ legal and ethics people say, we need to win this motherf****er.” He adds, “we’re starting anarchy here.”

Creamer, previously convicted of felony bank fraud, has visited the Obama White House more than 300 times. In one of the videos, he says Hillary Clinton personally knows about the false flag operation. Her campaign “is fully in it,” Creamer confirms. “Hillary knows through the chain of command what’s going on.”

Despite their aversion to covering stories that put Trump in a sympathetic light, members of the media had no choice but to cover the extremely newsworthy Oct. 15 weekend firebombing of Republican Party headquarters in Orange County, North Carolina. Gov. Pat McCrory called the arson “an attack on our democracy,” while one GOP official called it an act of “political terrorism.” Spray-painted on the building next door were a swastika and the sentence “Nazi Republicans get out of town or else.”

Meanwhile, most physical attacks on Trump supporters make only  local news outlets — if that. Rarely do such assaults get mentioned on the evening TV broadcast news or in The New York Times or The Washington Post.That's because they don't fit the leftist narrative that Republicans are violent, racist, Islamophobic homophobes.

Despite a lack of evidence, the Left deployed the same false narrative against the Tea Party movement virtually from its formation, while defending the criminal hooligans of Black Lives Matter and Occupy Wall Street as nonviolent and benign. Currency speculator George Soros has contributed to both movements through his philanthropy.

Here is a compilation of some of the attacks on Trump supporters:

On Oct. 15 in Bangor, Maine, vandals spray-painted about 20 parked cars outside a Trump rally. Trump supporter Paul Foster, whose van was hit with white paint, told reporters, "Why can't they do a peaceful protest instead of painting cars, all of this, to make their statement?"

 

Around Oct. 3, a couple of Trump supporters were assaulted in Zeitgeist, a San Francisco bar, after they were allegedly refused service for expressing support for Trump, GotNews reports. "The two Trump supporters were attacked, punched, and chased into the street by 'some thugs' that a barmaid called out from the back." Lilian Kim of ABC 7 Bay Area tweeted a photo of the men, in which one was wearing a Trump T-shirt and the other was wearing a "Blue Lives Matter" shirt.

 

On Sept. 28 in El Cajon, California, an angry mob at a Black Lives Matter protest beat 21-year-old Trump supporter Feras Jabro for wearing a "Make America Great Again" baseball cap. The assault was broadcast live using the smartphone app Periscope.

 

On Sept. 26 at Gustavus Adolphus College in St. Peter, Minnesota, as the first presidential debate was about to get underway, a woman wearing Trump campaign apparel was assaulted while heading to a debate watch event. "Nobody, regardless of race, gender, or political party, should feel unsafe because of the way they look or what they wear when they walk on campus," the Minnesota Federation of College Republicans said in a press release.

 

On Aug. 19 in Minneapolis, Minnesota, Trump supporters had to run a gauntlet of angry protesters to get into a Trump fundraiser at the Minneapolis Convention Center. When they left after the event they were hit, pushed, and spit on.

 

On Aug. 13 in Oak Ridge, Tennessee, 68-year-old cancer survivor Vester Bullock was beaten at a garage sale because he wore a Trump pin on his hat. The assailant "slammed his arms, walked up to me and said, 'My wife told me I shouldn't trust a God-damn Republican,'" he said. The man complained the staple gun Bullock sold him didn't work. "I told him 'I'll give you your money back,'" said Bullock. "But he kept calling me all kinds of names." The man punched Bullock in the jaw so hard he lost a tooth.

 

On Aug. 12 in the West Hollywood neighborhood of Los Angeles, two women assaulted pro-Trump activist Tim Treadstone after a Trump rally. "This blonde girl grabbed my iPhone and threw it as hard as she could to the pavement," he said. "And before I could pick it up, the brunette who was throwing the food at people punched me in the head. My glasses and my hat flew off. There were claw marks on my neck." Last week, the two women were formally charged with assault and battery.

 

The night of the rally, Treadstone and a group of Trump hat-wearers were denied service at a popular Mexican eatery. Customers began screaming at the Trump backers and throwing food at them. Earlier, at the West Hollywood rally, "a can of Monster energy drink, eggs, and dog feces were also thrown at pro-Trump demonstrators," according to Breitbart News. "The can of Monster hit one man on the back."

 

On Aug. 3 in Bloomfield, New Jersey, an assailant attacked a 62-year-old man who was walking down the street wearing a pro-Trump T-shirt, local police said. "The motorist inquired why [the man] was wearing the shirt, directing profanities at him," a police spokesman said. "The [victim] continued to walk away as [the] motorist followed him." The motorist hit the man several times with a crowbar, causing injuries to his arms, hands, and thighs,

 

On June 18, 19-year-old British national Michael Sandford tried to take a gun from a Las Vegas police officer during a Trump rally. Sandford was arrested and reportedly said he intended to use the gun to kill Trump. Unlike most of the anti-Trump attacks, this event was widely reported by the media.

 

On June 2, in San Jose, California, rioters assaulted a group of attendees leaving a Trump rally. Fourteen of those attacked have filed a class-action lawsuit against the city and Mayor Sam Liccardo. The attendees "were victimized by being forced by armed police to walk into a riot in full swing where many were assaulted while police looked on," said their lawyer, Harmeet K. Dhillon.

 

In San Jose, protesters also threw eggs, a tomato, and a bottle at Rachel Casey, a 29-year-old Trump supporter they cornered outside a hotel.

 

"I knew if I was to touch one of them or I was to grab one of the flags they were waving in my face that they would have attacked me or beaten me with those flag poles that were metal," Casey told Breitbart News. "I just kept a straight face, I don't know how. I just knew if I touched one of them I would get hurt. Luckily someone let me in that hotel, finally, someone finally opened the door."

 

On April 28, in Costa Mesa, California, anti-Trump demonstrators threw rocks at moving cars. One bloodied the face of a Trump supporter who was driving away after the rally. About 20 people were arrested.

 

On March 12 at the Dayton, Ohio, airport, Black Lives Matter supporter Thomas Dimassimo rushed the small stage where Trump was speaking, an attack that received widespread media attention. He was tackled by Secret Service agents before he could reach the GOP candidate and was later charged with disorderly conduct and inducing panic. Before the attack he tweeted: "I've had about all I can take from the violent trump ralliers. Saturday im [sic] going to check my people and spit on their false king." After his release from jail, hours later, he tweeted: "F**k you b**ch @realDonaldTrump[.]"

 

Violent demonstrators from left-wing organizations including MoveOn, Black Lives Matter, and People for Bernie, forced the cancellation of a planned Trump rally March 11 at the University of Illinois at Chicago. The belligerent anti-Trump activists streamed into the event and later celebrated shutting it down. The event, which led to the arrest of four people, received a great deal of media attention — though much of it focused on how peaceful the protesters supposedly were.

 

Dilbert comics creator Scott Adams received many replies when he took to Twitter recently to ask fellow Trump supporters to report threats they'd received, Heat Street reported Sept. 30.

 

One person wrote his wrist was fractured when he was attacked for being "an Irish Trump supporter and wearing [a] MAGA cap." Another tweeted "Had to take the #TrumpPence16 sticker off my car because I had my windows broken in 3 times."

 

Another man wrote his friend's 10-year-old daughter "was attacked by a mob yelling 'NAZI' 'B**CH' etc. Snatched her Trump sign and ripped it up." One man tweeted "Somebody claiming to be a civil rights lawyer called my boss claiming my pro-Trump tweets were breaking the law."

This is not an exhaustive list of violent attacks on Trump supporters.

No doubt there will be plenty more such assaults in the final two weeks, as Americans head to the polls.

And Hillary Clinton's campaign may be involved in those attacks.

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