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Another year, another record number of Americans willing to not only pay the $2,350 fee, but also appear in the US Treasury’s “name of shame” list published every, quarter which reveals all the now-former US citizens who have decided to hand over their US passport back to Uncle Sam and expatriate.

According to the latest US Treasury report, a record 4,279 individuals decided to give up their citizenship in 2015, up 864 from the previous full year record of 3,415, and up a stunning 560% from the peak hit during the Bush administration years. The latest Treasury report contains the names of the 1,058 former US citizens and permanent residents who gave up their passports in the period from September to December.

Below is a recent chart of showing the number of US expats over the past 10 years:

As Forbes adds, while clearly showing a troubling trend in the soaring number of expats, the published list is also incomplete, with many not counted. Surprisingly, no one seems to know exactly how big the real number is, even though the IRS and FBI both track Americans who renounce citizenship.

The main cause for the massive increase in renunciations is believed to be the Foreign Accounts Tax Compliance Act (FATCA), which came into force in 2010. The law imposes harsh penalties for non-compliance, even if people aren’t dodging it on purpose, Andrew Mitchel, an international lawyer who analyzes IRS data, told the Wall Street Journal. 

FATCA has ramped up worldwide and requires an annual Form 8938 filing if foreign assets meet a threshold. Foreign banks are sufficiently worried about keeping the IRS happy that many simply do not want American account holders. Still, leaving America can be costly. To exit, you generally must prove 5 years of IRS tax compliance. Plus, if you have a net worth greater than $2 million or have average annual net income tax for the 5 previous years of $160,000 or more, you can pay an exit tax.

“An increasing number of Americans appear to believe that having a US passport or long-term residency isn’t worth the hassle and cost of complying with US tax laws,” Mitchel said.

At the time, President Obama hailed the law as a “global standard” in countering tax evasion. It was passed by Congress in the wake of a scandal involving UBS AG bank, following disclosures made by banker–turned-whistleblower Bradley Birkenfeld in 2009. He testified that UBS had enabled its American customers to defraud the US tax authorities. The revelations forced UBS to admit it had encouraged illegal financial activity and was obliged to pay a staggering $547 million to settle the case.

Ironically, until the recent disclosure by Bloomberg following up on our own reporting about US tax havens such as Reno, Nevada which have been converted by financial olligarch families like the Rothschilds into their own personal tax evasion backyards, little did the world know just how far US hypocricy could stretch, in that while Obama was destroying tax havens around the globe and especially in Switzerland with FATCA et al, the president was quietly converting the US into the world’s biggest hot money and tax-laundering haven in the world.

Finally, while we showed the past decade of US expats above, few charts do the topic of US citizenship renunciation justice, like the one shown below, courtesy of Andrew Mitchel.

 

For those curious, this is what the Federal Register’s “name shame” list looks like.

via Zero Hedge http://ift.tt/20D7ESG Tyler Durden

Submitted by Gary Kaltbaum via GaryKaltbaum.com,

While my President was out this week patting himself on the back and taking victory laps over the "supposed" 4.9% unemployment rate, he forgot to mention a few important tidbits about what is really going on. We used to call them termites…the termites that were eating away at the economy because of foolish monetary policy by assinine central banks and even worse policy emanating out of this administration…but they are no longer just termites. The eating away of the economy has given rise to serious problems already front and center as well as the problems to come. But there was no mention of these FACTS by my President! It is simple! You cannot "easy money" your way to longer-term economic Shangri-la. You cannot tax and spend your way into a longer-term strong economy. You cannot create massive amounts of mandates, regulations, fees, fines and all that crap and turn it into longer-term strength that will feed on itself.
 
My President forgot to mention:

• The labor participation rate has conveniently continued to crash since the administration took over enabling the unemployment rate to be lower than reality!
• This administration and the economy has been the recipient of 0% rates since becoming President…the recipient of $4 trillion-plus of printed money here and depending on the abacus you are using, $15-20 trillion of printed money around the globe…leading to a responding market to all the printed money creating a faux wealth effect that now goes into reverse. Very simply, the easiest monetary policy in the history of time!
• Deflation almost everywhere except for your healthcare premiums and deductibles.
• GDP under 1%.
• The Baltic Dry Index hitting another new all-time record low.
• U.S. factory orders that have now dropped for 14 months in a row.
• Orders for class 8 trucks (the big ones) declining a measly 48 percent from a year ago.
• Junk bonds continuing to crash!.
• The Restaurant Performance Index falling to the lowest level since 2008.
• A major slowdown in rail traffic!
• Corporate profit margins peaking during the third quarter of 2014 and heading lower since.
• Food stamp beneficiaries…at or near all-time highs.
• Homelessness…not good!.
• Welfare spending…a measly $1 trillion/year through over 80 different federal programs.

Retail crashing:

• Wal-Mart is closing 269 stores, including 154 inside the United States.
•  KMart is closing dozens of stores.
•  JC Penney shutting down almost 100 stores.
•  Macys shutting 36 stores.
•  The Gap closing 175 stores.
•  Aeropostale clsoing 84 stores.
•  Finish Line closing 150 stores.
•  Sears shutting 100s of stores.
•  Massive sales and earnings misses by Kohls, Bed Bath and Beyond, Best Buy, Ralph Lauren and many others. All this while oil prices have crashed.

And of course:

Creation of $8.4 trillion of new debt under your watch! That's over and above the already assinine amounts of taxpayer dollars you receive. That's after you saying you would go line by line through the budget to root out all the waste and stating you would cut deficits in half.

 

Despite you saying you lowered the deficit by 50%, you forget to mention it was you who inflated the deficit in the first place.

 

The CBO now says deficits are going to double to back over $1 trillion/year very soon…and total debt will head into the high $20s (trillion)!

Lastly…the markets. The markets, being a great forecaster of the future…well, let's hope this time the markets are wrong!

 
Mr. President, we wish we could say you are leaving us with a rotting economy… but we are worried we are past the point of rotting as you leave this country much more in debt than when you came in. Anyone can become rich by getting an infinite amount of credit cards and maxing each one out before receiving the next one. It just never ends well. Someone always pays in the end!

*  *  *

Still buying the "hope"? Still think the skeptical naysaying non-patriots are "peddling fiction"? Well 9 charts paint a thousand words…

 

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

Several days ago, we showed the one chart which explains why Bank of America remains a stubborn non-BTFDer. This is what Michael Hartnett said last Thursday: “We remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations (currently heading sharply south – Chart 1) and credit conditions.”

 

Since then things appear to have gotten even worse, because while not only is the almost concluded Q4 earnings season on pace to confirm yet another earnings recession, with a blended earnings decline of -3.8%, which according to Factset “will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009“, but both Q1 and Q2 2016 are looking just as bad: as Factset notes in its latest weekly update, “in terms of earnings, the estimated declines for Q1 2016 and Q2 2016 are -5.3% and -0.4%.”

Putting this in perspective, just over a month ago, on December 31, 2015, the consensus for Q1 EPS was a growth of 0.8% vs a year ago. It is now down -5.3%…

 

… while revenues are likewise expected to drop by -0.1% compared to forecast incrase of 2.6% as of December 31.

 

As Factset then notes, as is usually the case, analysts are predicting significant increases in earnings and revenue growth in the 2nd half of the year. In terms of earnings, the estimated declines for Q1 2016 and Q2 2016 are -5.3% and -0.4%, while the estimated growth rates for Q3 2016 and Q4 2016 are 5.5% and 10.7%. In terms of revenues, the estimated declines for Q1 2016 and Q2 2016 are -0.1% and -0.1%, while the estimated growth rates for Q3 2016 and Q4 2016 are 2.3% and 4.5%.

In other words, hockey sticks that would make any central bank proud. The only problem is that these forecasts will never materialize, which can be seen in the full year EPS forecast below. As highlighted in the box below, in just one month full year EPS has declined from 4.3% to 2.2%.

We open it up to readers to determine in how many weeks will full year 2016 EPS be revised tom 4.3% as of the start of the year, to 2.2% currently, to negative, indicating at least 7 consecutive quarters of declining EPS, something not recorded even during the peak of the financial crisis.

Incidentally, an earnings recession is two consecutive negative quarters of EPS: we don’t know what the technical term is for seven…

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

Submitted by Paul Bordsky via Macro-Allocation.com,

It seems monetary policy is exhausted and the next exogenous lever to pull would be political fiscal initiatives. If/when they fail to stimulate demand, there would be only one avenue left – currency devaluation. If/when confidence in the mightiest currency wanes, we would expect the US dollar to be devalued too – not against other fiat currencies, but against a relatively scarce Fed asset.

Seriously Squirrely

On February 3, New York Fed President Bill Dudley noted financial conditions are considerably tighter than when the Fed hiked rates in December, and, though its members are not yet ready to draw conclusions about the policy path, the FOMC will surely consider such tightening financial conditions in its future deliberations. He further noted that a weakening of the global economy and additional dollar strength could have significant consequences for the U.S. economy. Bingo.

It seems we have been on the right path by arguing the Fed has taken control of dollar policy. Less clear is that the Fed acknowledges an inevitable global de-leveraging, and in such an environment a strong dollar would attract global wealth and capital to the US, which in turn would fund bank deposits and capital markets. (It is unlikely the Fed would acknowledge such a policy so economically hostile to its trade partners.)

To be sure, Dudley’s is a voice to heed. The New York Fed has a very special role in the Federal Reserve System. Not only does its president have permanent FOMC voting privileges, but the New York Fed represents Wall Street, and perhaps more significantly, the Fed’s majority shareholders. One could reasonably suspect that with Fed board members Daniel Tarullo and Jerome Powell, who generally do not comment on Fed policy, Dudley’s remarks reflect the willingness of core financial operators to endure less than optimal lending and/or yield curve conditions.

Weakening US and global credit and equity markets are hinting that policy makers may be losing their grip on the general perception that they have the collective ability to control demand and output growth. This week, the European Commission reduced its forecast for 2016 and 2017 growth in the UK. The Bank of England left its policy rate unchanged and signaled its intention to hike rates is less straightforward than it used to be.

Meanwhile, in the US this week productivity fell sharply, jobless claims were again higher than trend, but the unemployment rate fell to 4.9%, average hourly earnings rose sharply (2.5% year-over-year), and hours worked expanded. Such wage inflation provides the Fed cover to normalize rates further, which we argue it wants to do to maintain a stronger dollar.

Despite the rhetoric coming from monetary policy makers and whatever economic releases may be used to support their objectives, the real economy will do what it will do. Global trade continues to wane. The Baltic Dry Index (below) is plumbing five year lows.

Growing evidence suggests that the global economy is rolling over, as has been our core view, and that global monetary policy makers, after six years of highly unconventional policies meant to synthesize demand by goosing the financial system, have emptied their bag of stimulative tricks.

Again, we think the Fed will do whatever it takes to strengthen the dollar, including maintaining its normalization process if necessary, so that the US could import global wealth and capital amid a global economic slowdown.

Gold Redux?

Five years ago I wrote a comprehensive report with Lee Quaintance called Apropos of Everything, which sought to make sense of the global monetary system in an environment of excessive and increasing systemic leverage. The long report argued quite radically that the current global monetary system would ultimately fail (all have historically) under the weight of unsustainable leverage, and would likely be replaced by a system with a fixed exchange rate, probably using gold as its anchor. It is impossible to know now whether we were wrong or just very early.

My suspicion then was that before such an event could occur, the US dollar would likely gain significant strength against all major currencies. My rationale was that, unlike any time in history, there are no competing currencies with a value fixed to anything scarce. All currencies are created in fractionally reserved banking systems overseen and protected by each economy’s political dimension, which, in turn, always has incentive to choose short-term fixes over more rational long-term economic options.

In today’s monetary regime, the US has the strongest and best reserved banking system of any major currency (thanks to past QE), and the depth, breadth, fairness and oversight of its capital markets are without peer. This implies that were a global de-leveraging to occur, global wealth and capital denominated in other major currencies would be exchanged en masse for the world’s major reserve currency – King Dollar. Its unrivaled hegemony would gain stature among all fiat currencies in a global economic downturn.

To date in 2016, default-free treasury yields have dropped significantly. Whether this is due to the perception of a slowing US economy and falling inflation or the result of capital flight from abroad – or both – is unclear.

If the global economy has indeed reached crunch time, as we suspect, then we would expect the spot price of gold to move higher, and it has. Gold has been the best performing asset in 2016, rising almost 9% through last night.

Conventional wisdom argues that Treasury bonds and gold should move in opposite directions: bond prices should rise and gold prices should fall in a disinflationary or deflationary environment, and gold prices should rise and bond prices should fall in an inflationary environment. This understanding is incomplete in a very meaningful way. History shows that gold prices rise during periods of price deflation when its driver is systemic balance sheet de-leveraging.

Applied to today, if elevated leverage levels across global government, household and corporate balance sheets begin to overwhelm and crowd-out production and animal spirits, then consumer demand and the prices of goods and services should begin to decline.

One of the first places we would theoretically see struggling output is in natural resources because their production and consumption are directly impacted by economic activity. Consumer commodity prices are tougher for credit policy makers to manage because consumers do not borrow to buy a gallon of gas or a loaf of bread.

Obviously, we have seen commodity price deflation and negative sovereign yields begin to take root across the world over the past two years. Our reading of the evidence suggests that the commercial marketplace and capital markets are experiencing and anticipating global deflation from de-leveraging.

Finally, the political dimension is beginning to react to the loss of its economic power, as one would think it would have to in a global economy characterized by excessive leverage. How else might one explain the popularity of “extreme” presidential candidates on the right and left in the US? What was political radicalism a few years ago has become popular reality today. The masses in the world’s largest and most sophisticated economy are revolting against the political center. The implication is obvious: the status quo no longer serves the people.

We are pleased with the way our long Treasury and long gold positions have fared in our model portfolios so far this year, offsetting our long equity positions. We are considering whether to use some of our significant cash positions to add to these positions.

It seems monetary policy is exhausted and financial de-leveraging and austerity are naturally being imposed on economies. We should expect continued debt deflation, asset weakness and output contraction. The next exogenous lever to pull would be political fiscal initiatives. If/when they fail to stimulate demand, there would be only one avenue left – currency devaluation. If/when confidence in the mightiest fiat currency wanes, we would expect the US dollar to be devalued too – not against other fiat currencies, but against a relatively scarce Fed asset.

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

Now that Rand Paul is out of the race for the White House, Politico's Eliza Collins reports that his father Ron Paul, who ran in 2008 and 2012, isn't impressed by Ted Cruz's attempts to pick up the "free market" libertarian banner.

“You take a guy like Cruz, people are liking the Cruz — they think he’s for the free market, and [in reality] he’s owned by Goldman Sachs. I mean, he and Hillary have more in common than we would have with either Cruz or Trump or any of them so I just don’t think there is much picking,” Paul said of the Texas senator on Fox Business’ “Varney & Company" on Friday.

Surprisingly, the elder Paul seemed more attracted to the views of Vermont Sen. Bernie Sanders, who is giving Hillary Clinton a run for her money in the Democratic primary.

“On occasion, Bernie comes up with libertarian views when he talks about taking away the cronyism on Wall Street, so in essence he’s right, and occasionally he voted against war,” the former Texas congressman said when asked if there was a candidate who was truly for the free market.

"It's hard to find anybody — since Rand is out of it — anybody that would take a libertarian position, hardcore libertarian position on privacy, on the war issue and on economic policy," Paul added.

“So I always say: You can search for a long time, but you’re not gonna find anybody in the Republican or Democratic primary that even comes slightly close to ever being able to claim themselves a libertarian,” he concluded.

via Zero Hedge http://ift.tt/1W3lRSn Tyler Durden

Submitted by Lance Roberts via RealInvestmentAdvice.com,

RALLY FAILS, ALERTS RISE

Last week, I discussed the boost the market received as the BOJ made an unexpected move into negative interest rate territory combined with end of the month buying by portfolio managers. To wit:

“However, the announcement by the Bank of Japan (BOJ) to implement negative interest rates in a desperate last attempt to boost economic growth in Japan was only the catalyst that ignited the bulls. The “fuel” for the buying came from the end of the month portfolio buying by fund managers.”

But more importantly, was the push higher by stocks that I have been discussing with you over the last couple of weeks. To wit:

“Over the last few weeks, I have suggested the markets would likely provide a reflexive rally to allow investors to reduce equity risk in portfolios. This was due to the oversold condition that previously existed which would provide the “fuel” for a reflexive rally to sell into.

I traced out the potential for such a reflexive rally two weeks ago as shown in the chart below.”

Previous Chart

As I stated then, the most important parts of the chart above are the overbought / oversold indicators at the top and bottom. The oversold condition that once existed has been completely exhausted due to the gyrations in the markets over the last couple of weeks. This leaves little ability for a significant rally from this point which makes a push above overhead resistance unlikely.

“Just as an oversold condition provides the necessary “fuel” for an advance, the opposite is also true.”

Here is the problem.  I have updated the chart above through Friday’s close.

The rally failed at the previous reflex rally attempt during the late December/January plunge. This failure now cements that high point as resistance. Furthermore, the market continues to fail almost immediately when overbought conditions are met (red circles), which suggests that internals remain extraordinarily weak. 

HEAD & SHOULDERS – NOT JUST DANDRUFF

The good news, if you want to call it that, is that the market is currently holding above the recent lows as short-term oversold conditions once again approach. It is critically important that the market holds above that support, which is also the neckline of the current “head and shoulders” formation, as a break would lead to a more substantive decline.

However, this isn’t the first time that we have seen a “head and shoulders” topping pattern form COMBINED with a long-term major sell signal as shown above. I emphasize this point because many short-term technicians point out “head and shoulders” formations that consistently do not lead to more important declines. However, when this topping process combines with enough deterioration in the markets to issue long-term “sell signals,” it is something worth paying attention to.

The first chart shows the same development in 2000.

And again in 2007.

These are the only two points since the turn of the century where a topping process was combined with a long-term sell signal.

It is important to note that in both previous cases the markets did provide one last chance to exit before a more substantiative decline ensued. This is because by the time the market has declined enough to break the neckline, sellers have been temporarily exhausted. This allows the market to rise enough to test previous resistance where “sellers” once again emerge.

It is very likely that if, or when, the market breaks current neckline support, individuals will be given one last chance to exit the markets for safer ground. A failure to do so has previously been the start of the “trail of tears.”

PREDICTING OR PAYING ATTENTION?

Last night I gave a presentation to a group of doctors discussing the economy, the markets and what is most likely to come over the next few months.

One of the questions I was asked during the Q&A section was:

“How can you be so sure that you are right? No one can time the market?”

It is an interesting question, and one that I have been asked before. If you scroll down to the bottom of this report you will see a chart of the S&P 500 with the history of portfolio adjustments over time. You could call this timing, however, I prefer to call this risk management.

For me, “timing the market” is trying to be “all in” or “all out.” If you try and do that playing poker you are eventually going to go broke. 

However, a good poker player understands the “risk of losing” given the particular hand that he is dealt. He will bet much heavier given a “full house” versus a “pair of deuces.”  However, even given a great hand, a good poker player reads the other players at the table and adjusts his bets accordingly.

The same is true when it comes to managing your portfolio. While you may have a “great hand of stocks,” you must read the rest of the players in the market. If they are all buying or selling, what do they know that you possibly don’t. 

So, that brings me to the question above. I am NOT sure that I am right.

However, since last May I have held exposure in portfolios to 50% of normal equity allocations because the price trends of the market have been deteriorating. Furthermore, they continue to do so which is leading me to reduce allocations even more (see next section.)

Am I predicting a major market decline? NO. However, I am suggesting that given the current weight of evidence that one may very likely already be in process. The chart below is a MONTHLY chart of market indicators that measure a variety of market internals. Currently, every single measure is registering a “SELL” signal which has only occurred during the previous two bull market cycles. 

Now, you can certainly make the case for why “this time is different.”  However, if you are a good poker player, should you really be betting heavily given the current hand? 

Even if correction only reverts back to the previous peaks of the past two bull markets, such would entail an additional decline of 18% from current levels, or 27% from the previous peak. Such a correction would just about meet the average draw down of a bear market cycle throughout history as shown in the table below.

Are you ready for that?

IS NOW A TIME TO WORRY?

Based on all the data above, not to mention deteriorating economic, fundamental and earnings as well, should you be worried about your investments?

I found this note from United Capital rather interesting (emphasis is mine):

“For anxious investors who want a quick answer to the question, the simple answer is, “No.” Now we’ll explain why. First, corrections are natural, normal, and we’d even say, necessary. I’ve gone through many of them, having started my career in investment management just two months before the 1987 crash.

 

While different circumstances led to each one, the fundamental aspect of a correction (or even a bear market) is that the market simply reprices securities to better match the underpinnings of an investment as they currently are.

 

Sometimes, this may happen because of a recession, which we do not think is the most likely scenario, but in many other cases, it’s simply because stocks got a little ahead of themselves. Right now, stocks in the S&P 500 are more expensive relative to their earnings than they historically have tended to be, according to Ned Davis Research. That means that investors bid up share prices more than (or perhaps one might even venture to say “earlier than”) they should have.

 

In that sense, a correction is just that: “correcting” a stock’s value to what the earnings and net worth of the company in question should dictate.”

This really goes to the root of why I am so fed up with the financial advisory industry as a whole. Let me translate the above for you.

“We don’t really manage your money. What we do is encourage you to buy some stuff and then sit on it so we can charge you a fee.

 

When prices decline, because we don’t really pay attention to the markets, we have to send out an excuse letter to keep you from transferring your money to another advisor who actually pays attention to what is going on.

 

Even though we knew stocks were overvalued, and such overvaluation leads to corrective cycles in the market, we really didn’t think about selling stocks to reduce the risk of loss.  We are too busy trying to get other people to invest money with us. The more the better.

 

We hope you understand, but our revenue line is more important than yours. Oh, and please deposit more money in your account because dollar cost averaging works better for us than you.”

I realize that is a bit harsh, but I want to make a point. I know some really great advisors that work extremely hard for the clients, manage risk and try to ensure their clients reach their goals. If you ever read a site like Seeking Alpha, you will see a lot of them. Then there are these guys which give the rest of the industry a bad name.

Let me be clear with you. YES, it is time to worry, and it may be time to worry a lot. 

If I am wrong, and the markets turn around, we can ALWAYS buy stuff and sit on it again. But now is not that time. 

Apparently, if you don’t take some action with respect to the risk in your portfolio, no one else is going to either.

 

THE MONDAY MORNING CALL

As stated above, the market bounce failed much sooner than anticipated. This changes the tone of the market to substantially more bearish.

As shown in the chart below, on a very short-term basis the market is oversold and once again suggests the markets could get some buying early next week. However, they are also on the verge of breaking critical support.

I continue to suggest taking actions to reduce risk in portfolios by taking the following actions on ANY RALLIES:

• Trim back winning positions to original portfolio weights: Investment Rule: Let Winners Run
• Sell positions that simply are not working (if the position was not working in a rising market, it likely won’t in a declining market.) Investment Rule: Cut Losers Short
• Hold the cash raised from these activities until the next buying opportunity occurs. Investment Rule: Buy Low

One other point. The two moving averages in the chart above are the 200-day and 400-day. As you will notice they are about to cross. Because these two moving averages are so long in nature, THEY WILL CROSS. It is now inevitable UNLESS the market immediately reverses to a runaway stampede higher.

This “real death cross” was brought to my attention earlier this week by a loyal reader:

“Most identify the death cross as when the 50-day moving average breaks below the 200-day moving average on the S&P 500. However, the real death cross  takes place when the 200-day moving average crosses below the 400. In 13 of the last 18 major correction episodes going back 1920- 72%  this crossover marked the onset of a major Bear market.

 

In the five exceptions, which were 1953, 1990, 1984, 1987, and 1996, the same crossover actually ended the correction at that time. Importantly, these five episodes were during strongly trending SECULAR bull market cycles. Given we are not currently in one of those periods, it is likely a cross-over now would be more related to each of the market failures since the turn of the century.”

As I stated above, I am not “predicting” anything. What I am doing is suggesting that current trends, based on historical precedents, suggests that “something wicked this way comes.” 

via Zero Hedge http://ift.tt/1mm7c8D Tyler Durden