Category: zerohedge

Political prisoners in Europe used to be a thing of the past; as of Monday afternoon, Spain has two.

Spanish judge Carmen Lamela has ruled that the leaders of the two biggest grassroots pro-independence associations in Catalonia should remain in prison without bail on possible charges of sedition for which, if convicted, they could face prison sentences of up to 10 years. The legal investigation claims Jordi Sanchez, the leader of Catalan National Assembly (ANC) movement, and Jordi Cuixart, who heads the Omnium Cultural association, were heavily involved in organising the massive protest aimed at hindering a Guardia Civil investigation in Barcelona into the build-up for the 1 October illegal referendum. Specifically, members of the Guardia Civil were trapped in Catalan government offices on 20 September as a result of thousands of protestors encircling the building, in what has been described as a “siege” and during which three police vehicles were destroyed.

Now, in a decision that could further enflame separatist passions, both Cuixart and Sanchez, are set to spend the night in a prison near Madrid; the two earlier refused to answer questions from the judge overseeing the investigation. Summoned to court twice on Monday, on entering they gave clenched fists victory salutes to a small group of supporters.

Cuixart, left, and Sanchez arrive to the Audiencia Nacional Court to testify

The ANC and Omnium are the two most powerful non-institutional Catalan separatist organisations, responsible for organising the annual marches in which several hundred thousand people are estimated to take part.

As reported earlier, the chief of the Catalan police, Josep Lluis Trapero, was also questioned in the same courtroom on Monday for a second time in ten days, on possible charges of sedition over the regional police force’s allegedly overly passive role during the build-up to the 1 October referendum. Trapero, who prosecutors had also asked to be detained, was finally released without bail, although his passport was confiscated.

Predictably the imprisonment of two of their best-known local leaders has provoked outrage amongst the separatist movement according to The Independent, further raising tension on an already exceptionally fraught day in Spain’s prolonged political crisis in Catalonia.

According To The Spain Report, Catalan leader Carles Puigdemont tweeted the judge’s decision was “very bad news”.

“Imprisoning Jordi Cuixart and Jordi Sánchez is very bad news. They mean to imprison ideas but they make the need for freedom stronger in us.”

Deputy First Minister Oriol Junqueras also responded on Twitter within minutes, in English: “We ask to sit and talk and the PP, through the Public Prosecutor, responds with unconditional imprisonment for @jordisanchezp and @jcuixart”.

We ask to sit and talk and the PP, through the Public Prosecutor, responds with unconditional imprisonment for @jordisanchezp and @jcuixart

— Oriol Junqueras (@junqueras) October 16, 2017

The independence movements were clearly outraged: Omnium Cultural tweeted: “The loss of liberty for the chairmen of Omnium and the ANC is unacceptable in a democratic society. The mobilisation continues, they cannot imprison a whole people!”. The ANC released a pre-recorded message from Mr. Sánchez, in which he said his imprisonment did not respond “to any principle of justice”, and that the court sought to “frighten us, punish us for having defended liberty”.

The Catalan government’s Director of Foreign Communications, Joan Maria Pique, tweeted: “Shame. Spain, the Turkey of the west”.

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

Authored by James Howard Kunstler via Kunstler.com,

The Greeks and Romans had one up on us: their gods and goddesses were not so easy to impersonate. Their gods and goddesses acted at a remove from everyday life, out of reach, except in the popular imagination. Two thousand years later, along comes Hollywood with an industry designed to manufacture gods and goddesses, and churns them out in its “dream factories” like so many floor lamps.

Movies, it turned out, with their close-up shots on the giant silver screen, were a much better vehicle for depicting human mythology than the creaky old stagecraft of the Christian church, with its limp and tedious liturgical hocus-pocus. America went cuckoo for movies in our insatiable drive to comprehend the human condition — or at least to see it represented artistically.

The stereotype of the Hollywood Producer has been vividly established for nearly a hundred years now: a vulgarian alpha male in an expensive suit working the casting couch in his office on the lot. The studios made not a few movies about this entitled, predatory stock character, even back in the day when their rule was absolute. He was as well known as Porky Pig. Harvey Weinstein was the apotheosis of this type.

Source: Ben Garrison

Harvey Weinstein was in the goddess business, the way his ancestors were in the pants business or the pickle business. Women of a certain goddessy type came to him out of the cornfields, the cities, the slums, the backwaters of distant lands, and he transformed them into goddesses for the movie audiences. He was good at it.

For decades, it was as well-known in the movie business, as night follows day, that Harvey often behaved badly among the goddesses he created and trafficked in.

His reputation among the ladies must have been something like a walking-talking roach motel, Hell-in-a-bathrobe, with rat poison on top. Had he the good looks of Errol Flynn, the decorum of James Mason, and the melancholy charm of Humphrey Bogart, he might have gotten away with it forever.

But he had the look of some wild Teutonic forest swine, a monster out of the Maurice Sendak Wild Things gallery, with his oversized head and that unfortunate six-day scruff of beard bristling over his hoggish jowels.

He was a physical specimen of a villain that only his pet director, Quentin Tarantino, might have dreamed up. In body, he was the very essence of a slob. With all that money, you’d think he could have engaged the services of a personal trainer, a cosmetician, perhaps even a plastic surgeon to buff off the rough edges. But, perhaps, unlike everybody else in show business, he was comfortable being himself.

His antics were legend well before the recent official documentation of his evil deeds in The New York Times. It’s something of a wonder and a mystery that, over the years, more manufactured goddesses didn’t run shrieking from his clutches, or lodge a complaint with the proper authorities — but such were the blandishments of stardom, I guess, that they didn’t dare. You’d think a certain code would have been shared generously among the ladies around their pantheon: don’t ever let yourself be alone in a room, or even an elevator, with Harvey. If there was such a meme, it didn’t stick.

Paradoxically, this repulsive character, with his outrageously brutish temper to go along with his boorish approach to seduction, produced many of the truly excellent movies of the last quarter century: The English Patient, Shakespeare in Love, Pulp Fiction, Il Postino, Flirting With Disaster, Emma, Good Will Hunting, The Cider House Rules, Chocolat, Confessions of a Dangerous Mind, Chicago, Cold Mountain, Bad Santa, The King’s Speech, The Artist, The Human Stain, Silver Linings Playbook, Finding Neverland, Fruitvale Station, August: Osage County, The Fighter, Lion, and some not yet released. Many of these won awards, including Best Picture, from the film academy that tossed him under the bus last week.

Harvey’s story is an old one: hubris. He was too intoxicated with his own role as goddess-maker to recognize the dangers of fooling around in his own workshop. Especially in these times of all-out gender warfare. The other gnomes, elves, manufactured gods and goddesses in the Hollywood workshop only piled onto him when they thought it was safe (for their careers) to do so, so shame on them and boo-hoo. They’re as gutless as the grifters in congress.

But remember, there’s nothing that Hollywood, and perhaps America itself (if that entity still exists as a stock character), loves better than a redemption tale and a comeback. Harvey might do some jail time. When he comes out, I doubt it will be as a born-again evangelical pastor. But, heck, these days you can make movies on your phone. Don’t be surprised if the old reprobate turns up again in show biz, like the demonic “Michael Myers” in that sturdy old chestnut Halloween.

 

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As U.S. equity markets casually melt up to all new highs with each passing day, Morgan Stanley Equity Strategist Michael Wilson, whose 2,550 year-end price target from back in August was just breached in a matter of months, says he’s getting somewhat concerned given Fed tightening, tax cut legislation that looks increasingly unlikely to pass, USD strengthening and extreme levels in pretty much every economic indicator which will make future improvement nearly impossible.

Given that, Wilson says he now sees “a greater risk for a correction than we have seen in a while…”

With the S&P 500 reaching the lower end of our short term price target (2550-75) we put out in August, we think there is a greater risk for a correction than we have seen in a while. If stocks follow the pattern they have been all year, actual earnings season will be a sell the news event and we could have a decent pull back or consolidation. Other things we think warrant concern include the Fed’s balance sheet reduction, uncertainty around Fed Chair nomination, negotiations on tax legislation, and the scope for a counter-trend US dollar rally.

 

Six weeks ago we went out on a limb with a shorter term target of 2550-75 for the S&P 500 to reach before 3Q earnings season as the market would realize consensus expectations were once again too low. Having breached that lower bound 9 days ago, we believe it is appropriate to respect the pattern we have been witnessing all year for stocks to rally into earnings season and then fade as the numbers actually get reported. Year to date, this has led to a max 3% drawdown which is not worth trying to play when there is still 15-20% upside. However, with less than 10% upside to our target, the risk reward isn’t as attractive to just ignore the potential for such a move. We also think it could be bigger than 3% this time given other factors at work. Specifically, we must acknowledge:

 

• the Fed is reducing its balance sheet this month for the first time since QE began,
• tax cut legislation is trickier than tax cut promises, the negotiations begin this month
• we are going to get the next Fed Chair nomination later this month which could disrupt financial conditions
• The US Dollar appears to be in the midst of a countertrend rally, and
• given the extremes in leading economic indicators like the purchasing manager surveys, the chance of a peak rate of change looks more likely than not.

Of course, ‘the catch’ is that he also sees any pullback as just another short-lived opportunity to BTFD!

To summarize, we believe the cyclical bull market that began in 2009 is very much intact but we are more confident than ever that we are in the latter stages. As we noted in our initiation, returns are typically very strong at the end and investors cannot afford to miss such moves given the likelihood of lower returns than normal over the next 10 years.

 

We believe the next month offers a higher likelihood for a 5%+ correction than we have seen since the summer of 2016. With only 1 percent upside to our short term target of 2575 and 5%+ potential downside, this is not the time to be aggressive like it was in August. Rather than a 5%+ correction we could simply trade sideways for a month.

 

In either case, we will be buyers of that pullback or consolidation as we believe it will set the stage for the next leg higher, toward our 2,700 target on the S&P by 1Q. Our focus remains on small/mid caps, Financials, and late cycle sectors including Energy, Materials, Industrials, and Tech

So, what evidence does Wilson offer up to support his thesis that equity markets will continue to push higher for the foreseeable future?  Well, apparently he’s encouraged that, after a shift to value stocks earlier this summer…

…investors have returned to cyclical stocks in a big way since August signaling that “Part II” of the reflation trade has commenced….to summarize, if we understand it correctly, what goes up will necessarily continue to go up.

So, what tangible “fundamental” evidence does Morgan Stanley offer to support their thesis that stocks have a ways to go to the upside?  Well, none really…just a relative multiple chart suggesting that a basket of “reflation” equities trades at a P/E discount to “deflation” equities.

The key fundamental drivers of our thesis are still very much in place, allowing these nominal GDP / inflation-levered sectors and styles to lead. Exhibit 5 below shows that the median relative forward P/E for “reflation” vs. “deflation” stocks has re-rated higher over the past two months. The relative multiple of this pair remains depressed since the Financial Crisis which makes sense given the persistent deflationary pressures—we would expect a continuation of the recent re-rating of reflation levered equity valuations higher as deflationary pressures fade and re-flation emerges. As further fundamental support, Exhibit 6 shows that relative earnings revisions breadth for the aforementioned pair also appears to have bottomed.

Of course, in our ETF-driven world it’s probably not surprising that Morgan Stanley chooses to only focus on relative valuations and completely dismisses absolute valuation levels that look increasingly unsustainable…alas, the chart below was also dismissed in 1999 as irrelevant but by 2001 it was suddenly relevant again…

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Authored by Patrick Watson via Mauldin Economics,

Wall Street endlessly gushes about retirement. Its TV commercials show how wonderful life will be in our golden years—when we are old, yet still healthy and wealthy enough to go hang-gliding every day.

Meanwhile, out here in the real world, most working-age Americans don’t want to talk or even think about retirement. Often this is because they know they aren’t saving enough and probably will have to work until they drop dead.

This is the elephant in the room. 10,000 US Baby Boomers turn 65 every day. For most, life at that milestone won’t look much like the TV commercials.

That sounds dire, but it doesn’t have to be. Let’s look at ways this problem could be solved.

But first, some more facts.

Retirement Shortfall Among All Income Levels

Lately, I’ve been working with John Mauldin to research the huge public pension fund shortfalls. But it’s not just big funds that don’t save enough—most individuals are in the same position, or worse.

Teresa Ghilarducci is a labor economist at The New School, specializing in retirement security. Here’s what she told the Washington Post last month.

“There is no part of the country where the majority of middle-class older workers have adequate retirement savings to maintain their standard of living in their retirement.”

Her research shows even high-income workers haven’t saved enough to fund comfortable retirements.

The circles in this chart show how much money people should be saving for retirement. The shortfall (the red part) is around 30% for all income levels.

The green part of the circles is what Social Security provides. The program was never meant to be a full pension, and it clearly isn’t delivering one.

Yet a majority of the age 65+ population depends on Social Security for at least half of its income.

These are sobering numbers:

• 19.7% of retirees get 100% of their income from Social Security.
• A full third (33.4%) depend on it for 90% of their income.
• And 61.1% get at least half their income from Social Security.

Now, consider what John Mauldin wrote in Thoughts from the Frontline last weekend (I’d also highly recommend subscribing to his weekly letter here). The federal government’s unfunded 75-year liability for Social Security and Medicare combined is $46.7 trillion.

So Americans aren’t saving enough for themselves, nor is the government saving on their behalf. And the Millennial generation, whose taxes Boomers and Gen-Xers will depend on, is not exactly off to a great career start.

It’s hard to see how this story could end well. It certainly won’t end with every older American enjoying a leisurely retirement.

“I’m Going to Work Until I Die.” Yes, You Most Likely Will, So Embrace It

Unprepared retirees are filling the gap the only way they can: by working well into their golden years.

In 1986, 10.6% of the population older than 65 was still working. In 2016, it was 18.6%, and I suspect the number will keep rising.

The Washington Post story profiles some working senior citizens:

Richard Dever had swabbed the campground shower stalls and emptied 20 garbage cans, and now he climbed slowly onto a John Deere mower to cut a couple acres of grass.

 

“I’m going to work until I die, if I can, because I need the money,” said Dever, 74, who drove 1,400 miles to this Maine campground from his home in Indiana to take a temporary job that pays $10 an hour.

 

Dever shifted gently in the tractor seat, a rubber cushion carefully positioned to ease the bursitis in his hip—a snapshot of the new reality of old age in America.

Dever’s story isn’t unusual. Many older people sell their homes, buy campers, and move around the country. Some just enjoy sightseeing—but many are making ends meet as seasonal laborers. Amazon even has a formal program for them called CamperForce.

Amazon makes it sound fun: “Your next RV adventure is here,” says the website. But it’s not the kind of adventure most camping enthusiasts would prefer.

Now, the idea of working past age 65 isn’t necessarily so bad. After all, work isn’t “work” if you enjoy doing it. The problem arises when the work is physically difficult or otherwise unpleasant.

I know many people over 65 who are very happily employed. John Mauldin, for one.

He’s 68 and keeps a schedule that would exhaust much younger folks. Working past retirement age isn’t always a nightmare—though it can definitely be one if you are forced into it.

Encore Career

This problem currently affects 76 million Baby Boomers who have already entered or are about to enter their retirement years. At 53, I’m one of them.

We know most Americans in that age group don’t have enough savings to simply stop working. If that’s you, here are some tips what to do.

1. Save and invest as much as you can, even if the amount seems small. It will still come in handy. (In my recent exclusive special report, I describe one fixed income asset class that can yield up to 6-8% returns with moderate risks.  Download it here for free).

2. Take care of your health. Lose weight, get exercise, eat healthy. This will both minimize your medical expenses and let you work more comfortably if you need to.

3. Think ahead about what kind of work you can do in retirement. Identify a job you can “retire into.” It should be something you enjoy, that earns real income, and that you’ll be able to continue even as aging slows you down.

4. Don’t look at it as Plan B. Think of retirement as a new stage in your career. As I said, work is only work if you don’t enjoy it. If you plan ahead, it can be a time when you work on your own terms instead of someone else’s.

In my case, there’s no reason I can’t keep writing into my seventies. Maybe I’ll take more vacations, but I don’t want to stop writing completely. I’m not sure I could stop even if I wanted to.

Meanwhile, those extra working years will let me save longer and my savings to compound, which will leave me in a better position when I can’t work anymore and have to tap my savings.

Medical breakthroughs extend what my colleague Patrick Cox calls “health spans.” Not only can we live longer, we can be healthier longer. There’s a good chance 80 will be the new 60.

In that regard, watch this short video by Gary Vaynerchuk. It has a little profanity at the end, but watch anyway. He has a message that may help.

We all have more time than we think… and we can do a lot with it.

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

An angry Hillary Clinton has been making the rounds in recent weeks blaming all the usual suspects for her election loss last year…you know, Assange, Comey, the unfortunate mall cop who tripped over a microphone cord and ruined her speech at the Little Rock Mall food court in 1984…

But we can’t remember a recent interview in which the former presidential candidate came off quite so bitter as when she sat down with Australian anchor Sarah Ferguson of 4 Corners for an interview that aired earlier today.

On Assange, Clinton described him as a “tool of Russian intelligence” and scoffed at the idea that he’s a “martyr for free speech and freedom of information.”

Clinton:  “I think Assange has become a nihilistic opportunist who does the bidding of a dictator [Putin].”

 

Ferguson:  “Lots of people, including in Australia, that that Assange is a martyr for free speech and freedom of information.  How would you describe him?”

 

Clinton:  “I mean, he’s a tool of Russian intelligence.  If he’s such a martyr for free speech, why doesn’t WikiLeaks ever publish anything coming out of Russia?”

 

Ferguson:  “Isn’t he just doing what journalists do which is publish information when they get it?”

 

Clinton:  “I don’t think so.  I think for number one, it’s stolen information, and number two, if all you did was publish it, that would be one thing, but there was a concerted operation between WikiLeaks and Russia and most likely, people in the United States to, as I say, weaponized that information.”

.@HillaryClinton says @JulianAssange is a “tool of Russian intelligence”. Watch the interview tonight on #4Corners. http://pic.twitter.com/htY89d7GVe

— 4corners (@4corners) October 15, 2017

 

On Comey, Hillary is apparently convinced that “shivving someone” and “investigating a series of federal crimes” are phrases that can be used interchangeably.

Ferguson:  “You say Jim Comey shivved me.”

 

Clinton:  “Oh, he did.  Well he did shiv me.  Yeah.  There’s never been a good explanation as to why he did what he did.”

.@HillaryClinton took @FergusonNews by surprise this time around. Watch it tonight 8.30pm AEDT on ABC TV or Facebook https://t.co/y6jMJ2EFxj http://pic.twitter.com/orTtu0P6rD

— 4corners (@4corners) October 16, 2017

 

Meanwhile, and not terribly surprisingly, Hillary says that Trump is the most “dangerous President the U.S. has ever had” and she suggests that “the whole world should be concerned.”

“I think he is because he is impulsive.  He lacks self control.  He is totally consumer by how he is viewed and what people think of him.  He is vindictive.”

 

“I think the whole world should be concerned.”

.@HillaryClinton does not mince her words in this interview, then again neither does @FergusonNews. A special #4Corners next week. http://pic.twitter.com/L2vjZkwQBH

— 4corners (@4corners) October 9, 2017

 

Finally, Hillary shares her opinion that Fox News has morphed into an “advocacy outfit” that is just not “journalism anymore.”

“I think Fox News has been a pernicious influence on our elections, ever since it came into being, back in the early 90s and I think that they’re an advocacy outfit, they’re not journalism anymore.”

.@HillaryClinton says @FoxNews no longer a journalism outfit. http://pic.twitter.com/DUWM5WphCG

— 4corners (@4corners) October 16, 2017

 

And while she didn’t specifically share her opinions on MSNBC, WaPo, CNN and the New York Times, we presume she sees those ‘outfits’ as something other than liberal advocacy groups?

For those interested, the full interview can be enjoyed here:

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

After some initial confusion, Netflix stock surged after hours, a repeat of what it did last quarter, soaring above its all time high price, up over 2% after reporting Q3 numbers which while beating slightly on revenues ($2.99Bn, Exp. $2.97Bn), and beating modestly on non-GAAP EPS (GAAP EPS$0.29, non-GAAP EPS $0.37, exp. $0.32), were far more remarkable for the subscriber numbers, which smashed expectations as follows:

• Q3 total net streaming additions 5.3 million, Exp. 4.5 million
  • Q3 domestic net streaming additions 850,000, exp. 774,000
  • Q3 international net streaming additions 4.45 million, exp. 3.72 million

The addition of 5.2 million subs in Q2 was the largest increase ever during the period, which traditionally is among the company’s slowest time of year.

Netflix’ Q4 outlook was in line with expecations and the company now expects Q4 net streaming adds of 6.3 million (1.25m in the US and 5.05m internationally) just fractionally higher than the consensus estimate of 6.29 million and below the 7.05 million in the year ago quarter (which was the company’s all time record high quarter).

The company expects $3.27 billion in Q4 revenue, also above the consensus estimate of $3.15 billion, generating net income of $183 million.

One thing that investors will focus on is the company’s content spend for next year, which Netflix is increasing once again: having previously said they would spend $7 billion, they are raising that by as much as a $1 billion, forecasting that “we’ll spend $7-8 billion on content (on a P&L basis) in 2018.”

Also, it will come as no surprise that with Wall Street expecting the company to spend $8.7 billion this year on content…

… it will continue spending an ungodly amount. Netflix now has 109.2 million subscribers worldwide, but the success has come at a steep price and as of Sept.30, NFLX’s total content obligations were a record $17 billion.

The company’s historical content spending is as follows:

• 2018: $7-$8 billion (forecast)
  
• 2017: $6 billion
  
• 2016: $5 billion
  
• 2015: $4 billion
  
• 2014: $3 billion
  
• 2013: $2 billion

Also, as one would expect, the company remains in its near-record cash burning ways, reporting that in Q3 it burned $464 million, modestly below the $608 million it burned last quarter, and $506 million one year earlier.

Discussing its relentless cash burn, Netflix said its negative FCF, that despite growing operating income, “is due to growth of our content spend, original content in particular, where we pay for the titles before consumers enjoy the content, and the asset is amortized by estimated viewing over time. We anticipate financing our capital needs in the debt market as our after-tax cost of debt is lower than our cost of equity.“

Below are some more highlights from Netflix’ letter, first focusin on subscribers:

Global streaming revenue in Q3 rose 33% year over year, driven by a 24% increase in average paid memberships and 7% growth in ASP. Operating income nearly doubled year-over-year to $209 million with our Q3 global operating margin of 7.0% putting us right on track to achieve our full year target of 7%. EPS of $0.29 included a pre-tax $51 million non-cash loss from F/X remeasurement on our Euro bond (or $39 million after tax based on a 24% tax rate). Higher than expected excess tax benefit from stock based compensation benefited our tax rate by $5 million vs. our forecast. As a reminder, the quarterly guidance we provide is our actual internal forecast at the time we report. We added a Q3-record 5.3 million memberships globally (up 49% year-over-year) as we continued to benefit from strong appetite for our original series and films, as well as the adoption of internet entertainment across the world. Relative to our guidance of 4.4 million net adds, we under-forecasted both US and international acquisition. Year to date net adds of 15.5 million are up 29% versus last year.

On the the domestic vs international margin, and why the first missed while the second beat:

Domestic contribution margin in Q3 of 35.8% vs. 36.4% last year was below our forecast of 37.1% due primarily to the earlier-than-anticipated close of certain content deals. The foreign currency impact in the quarter was +$13 million and Q3 international revenue grew 54% year over year, excluding currency. F/X-neutral ASP increased 7.4% year over year. International contribution profit margin of 4.7% exceeded our 2.3% guidance, also due to the timing of content deals.

On the company’s guidance:

For Q4, we forecast global net adds of 6.30m (1.25m in the US and 5.05m internationally) vs. 7.05m in the year ago quarter (which was our all-time high for quarterly net adds). We recently announced price adjustments in many markets to our HD and 4K video plans while keeping our SD plan mostly unchanged (still $7.99 in the US, for instance). Existing members will be notified and their prices will be adjusted on a rolling basis over the next few months. Increased revenue over time will help us grow our content offering and continue our global operating margin growth.

Here is the warning that the company’s contribution margin will decline as it focuses on marketing:

We’ve been focused on growing global operating margin as our primary profitability metric since hitting our 2020 US contribution margin goal of 40% this past Q1. This allows us to avoid near term optimization for specific domestic or international contribution margin targets which could impede our long term growth. For instance, we anticipate our Q4’17 US contribution margin will be 34.4% (a decline both year-on-year and sequentially) as we boost our marketing investment against a growing content slate. We spend disproportionately in the US to generate media and influencer awareness for our programming which we believe, in turn, is an effective way to facilitate word of mouth globally. In our international segment, we are on track to generate positive contribution profit for the full year. As we move into 2018, we aim to achieve steady improvement in international profitability and a growing operating margin as our success in many large markets helps fund investments throughout Asia and the rest of the world.

Perhaps most important, is the discussion of the Netflix content portfolio and the gargantuan content commitments:

Investors often ask us about continued access to content from diversified media companies. While we have multi-year deals in place preventing any sudden reduction in content licensing, the long-term trends are clear. Our future largely lies in exclusive original content that drives both excitement around Netflix and enormous viewing satisfaction for our global membership and its wide variety of tastes. Our investment in Netflix originals is over a quarter of our total P&L content budget in 2017 and will continue to grow. With $17 billion in content commitments over the next several years and a growing library of owned content ($2.5 billion net book value at the end of the quarter), we remain quite comfortable with our ability to please our members around the world. We’ll spend $7-8 billion on content (on a P&L basis) in 2018.

On competition and usage, where everyone is jumping in:

Since 2013, we’ve taken the Long Term View that we’re in the early stages of the worldwide, multi-decade transition from linear TV to internet entertainment. Recently, it’s been unfolding right before our eyes: Disney announced plans to launch direct-to-consumer services for ESPN and its other brands, cable network owners are licensing their channels to virtual MVPDs like Hulu, YouTube, Sling TV, and DirecTV Now, CBS’ All Access is expanding internationally, Apple is reportedly planning on spending $1 billion on original content and Amazon is streaming NFL games while its Prime Video service has gone global. Facebook launched its Watch tab for original videos. At the same time, linear TV networks like MTV, A&E and WGN are cutting down on scripted series. Last year, the number of original scripted series on linear TV (across broadcast, premium and basic cable) began to decrease as online services ramped up activity.

Finally, on cash burn:

Free cash flow in Q3 totaled -$465 million vs. -$506 million last year and -$608 million in Q2’17. There is no change to our expectation for FCF of -$2.0 to -$2.5 billion for the full year 2017. Negative FCF, despite growing operating income, is due to growth of our content spend, original content in particular, where we pay for the titles before consumers enjoy the content, and the asset is amortized by estimated viewing over time. We anticipate financing our capital needs in the debt market as our after-tax cost of debt is lower than our cost of equity.

Judging by the afterhours stock response , investors are far less worried about the relentless cash burn, and the $17 billion in already accrued content commitments, and instead are are more impressed with the subscriber additions, as a result sending the stock over 2% higher.

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Authored by Simon Black via SovereignMan.com,

Something pretty miraculous happened recently.

It appears that Jamie Dimon, CEO of JP Morgan Chase, went nearly TWO WEEKS without bashing Bitcoin.

This must be a record for Mr. Dimon, who seems to have barely been able to last an hour without calling out Bitcoin as a “fraud”, or a refuge for criminals and North Koreans.

Mr. Dimon finally broke his Zen-like meditative silence late last week, once again returning to the familiar assaults we’ve come to expect from the world’s most powerful banker.

On Thursday, Dimon downplayed the importance of Bitcoin during a teleconference with journalists, and then said he wouldn’t talk about cryptocurrency anymore.

One day later, Dimon was talking about cryptocurrency again, this time at the annual meeting of the Institute for International Finance.

Dimon’s rant was in top form, and he went back to his core material– governments won’t allow Bitcoin to exist, it’s only useful for criminals, etc.

He was later joined by his sidekick Larry Fink, Chairman and CEO of Blackrock (the largest investment management firm in the world with over $5.7 trillion under management).

Fink stated succinctly that Bitoin is “an index for how much demand for money laundering there is in the world.”

Now, these are clearly not dumb guys. Dimon and Fink are princes of Wall Street. They know finance.

But it’s pretty obvious they haven’t done their homework on cryptocurrency… since there’s really no objective evidence to support their assertions.

Dimon’s idea that Bitcoin is a “great product” for criminals is simply WRONG. Bitcoin is terrible for criminals.

Why? Easy. Bitcoin is not fully anonymous. Every single Bitcoin that has ever been mined… and every single transaction in Bitcoin that has ever been made… is recorded in the Blockchain.

In other words, it’s all public information.

That’s not to say that people’s names and addresses are recorded in the Blockchain; instead, a typical transaction record includes information about Bitcoin Wallet IDs, block numbers, etc.

[Visually, it looks something like this]

But for people with enough resources (i.e. governments), the transactions can be traced back to the source.

Here’s an easy example.

Let’s say Alvin the Arms Dealer signs up for a new account at Coinbase– the most popular exchange in the world.

Alvin links his Coinbase account to his bank account at, say, hmmm… JP Morgan Chase, and puts in an order to buy 100 Bitcoin.

The money transfers from JP Morgan to Coinbase, and Alvin’s Coinbase wallet is credited with 100 Bitcoin.

Alvin now sends those 100 Bitcoin to his friend Marvin the Money Launder.

Marvin sells the Bitcoin at another exchange, and deposits the US dollars into his own bank account.

EVERY SINGLE ONE OF THESE TRANSACTIONS has been posted to the blockchain.

And if the FBI or INTERPOL really looks into it, they’ll be able to trace Marvin’s bank deposit back to Alvin’s initial purchase of Bitcoin at Coinbase. Boom. Smoking gun.

In other words, if you’re the FBI, you should HOPE that criminals use Bitcoin. They’ll be easier to catch.

But any criminal with half a brain [oxymoron, I know] is already aware of these issues. So they’ll probably stick to Amazon.com giftcards… which is a MUCH easier way to launder money.

The other laughable point that Dimon makes is that ‘governments won’t allow Bitcoin to exist’.

He believes that governments want to remain in control of money, so at some point they’ll merely outlaw Bitcoin. And poof… demand will vanish.

This is a completely naive view.

Marijuana been illegal under US federal law for DECADES. And yet demand only grows.

Pirating movies is also illegal. And those rules have been aggressively enforced since the passage of the Digital Millennium Copyright Act nearly 20-years ago.

But illegal downloads of movies, music, software, etc. still constitute roughly 25% of all Internet traffic, according to a study commissioned by NBC Universal.

Bitcoin would be even harder to control. You don’t even need to be connected to the Internet in order to receive or store Bitcoin. So fat chance they’ll be able to enforce a ban.

Any attempt to get rid of Bitcoin would be about as successful as preventing people from smoking weed or pirating the latest Game of Thrones episode.

But… Uncle Sam does have one weapon… one way they could potentially disrupt Bitcoin.

Some day the US government and Federal Reserve might actually wake up and realize that crypto is the future.

And when that day comes, the obvious tactic would be to create their own version of the Blockchain that uses “crypto-dollars”.

Cryptodollars would be equivalent to US dollars. So $1 in physical cash = $1 in your bank account = 1 cryptodollar.

Cryptodollars would be legal tender and accepted everywhere in the country– Wal Mart, Amazon, etc., but without any of the wild gyrations and fluctuations that we see in the Bitcoin price.

The introduction of cryptodollars would clearly have an impact on the demand for Bitcoin.

Hardcore users would certainly still hold Bitcoin, so it wouldn’t go to zero.

But casual users might very well abandon Bitcoin in favor of cryptodollars due to the convenience of being able to spend them anywhere.

The added benefit to the US government is that a crypto-dollar blockchain would solidify the dollar’s status as the international reserve currency.

So they definitely have compelling reasons to do this.

Now, it might never happen. Or it could take years.

But the possibility exists. So keep that in mind before going ‘all in’ on crypto.

And to continue learning how to safely grow your wealth, I encourage you to download our free Perfect Plan B Guide.

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Another day, another record high…

 

To begin – 'Murica, fuck yeah!!

 

North Korea headlines and 'John Taylor For Fed Head' headlines prompted some turmoil in FX markets, bond markets, and commodity markets… but stocks didn't even blink…

 

Trannies were worst with Small Caps clinging to unch but GS, AAPL, JPM, and TRV accounted for 100% of the points gains in The Dow…

 

The machines really wanted Dow 23,000 amid a very chaotic day in VIX land today…

 

Small Caps continue to tread water… (1509, 1511, 1508, 1512, 1510, 1504, 1508, 1507, 1505, 1503, 1502) even as earnings expectations tumble…

 

Bank stocks soared today – loving the collapse in the yield curve…

 

Healthcare stock were hit again on Trump's "Getting away with murder" comments…

 

Treasury yields rose on the day but notably bear flattened with the front-end drastically underperforming…

 

The Dollar Index rallied on the day led by AUD and CAD weakness (odd on a strong commodity day) and cable tumbled on May's comments…

 

WTI Crude (and Brent) surged overnight to 2-week highs on Iraq 'invasion' headlines but WTI was unable to hold above $52…

 

Gold's bounce after CPI last week – extending its post-Golden-Week gains – stalled today after John Taylor headlines…

 

Copper made headlines – hitting a 3 year high, surging after China's Golden Week holiday ended and ahead of this week's National Congress to prove everything is awesome in the red ponzi…

Which as we noted earlier – raises the question – is copper overdone or do 10Y Yields need to explode 75bps higher…

 

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Former trader and author of best-selling book “The Black Swan” sat down for an interview with Bloomberg News to mark the upcoming thirtieth anniversary of the stock-market crash that occurred on Oct. 19, 1987 – otherwise known as Black Monday.

Taleb famously supercharged his career – and earned a considerable sum of money (though turns out it was less than Taleb felt he deserved) – thanks to his trading profits from that day, which he said were in the “tens of millions of dollars.”

But what did he trade, and how? And furthermore, what was going through his head as he watched the market crumble around him?

Answering a question about what specific strategies he employed, Taleb explained that he relied on “tail options” – contracts that, because they were way out of the money, could be purchased for negligible sums – and placed most of his bets in “professional” markets like currencies and Eurodollar futures.

“The dollar of course collapsed. Dollar-yen options – we had options we had bought for $10,000 in inventory that were selling for 17 million.

 

The thing was going…it was out of control. The big payoffs weren’t in the main, big currencies, but in the ones where the move was a big surprise like Eurodollar or yen. The Swiss franc also had high volatility.”

Asked why the movements in currency and fixed income markets weren’t as heavily covered as the moves in the stock market – which is where the bulk of that day’s carnage unfolded – Taleb said it’s because these markets are strictly for professional traders. Few middle-class investors traded bonds or owned foreign currencies outright back – but everybody seemed to own stocks.

“Because it was a professional market…it was the largest market, fixed income, at the time…but only professionals talk about these things. And all the professionals that were around then are dead…Everybody talks about stocks because people invest in stocks.”

Taleb declined to disclose how much First Boston – the investment bank at which he was employed – paid him for his success that day, though he did say that, because most of his colleagues lost money, the sum was smaller than he had hoped.

“I remember the P&L. In today’s terms for the firm it would be something substantial. But at the time, compensation wasn’t the same. It was in the mid-tens of millions. I made $60, $70, $80 million in one day.

 

First Boston treated me very well. The problem was that it was still a common system where everybody had to share…and everybody had lost money except for me and one other fellow.”

Taleb said he vividly remembers Oct. 20, the day after the crash, when, he said, nearly all of his counterparties were outbidding his offer for his options positions by massive margins.

He specifically remembers trading with famed commodity speculator Richard Dennis, whose hedge fund went bust that day.

"I remember the [October 20], I get on the phone…and I remember there was a fellow called Richard Dennis who went bankrupt that morning at the open. There was a rally in interest rates and the guy was short eurodollars…he lost his $50 million fund…they were liquidating the thing. And I remember I had a huge delta in eurodollars. I remember then vividly offering something on the phone and filling it considerably higher. So, the guy in the pit, I’d say let’s sell here and he’d sell higher. It was like the movie trading places…all morning I remember we were selling above our offers."

Taleb says the events of Black Monday left a lasting impression on him. His success made him brash and overconfident. But it also confirmed his view that the market’s approach to calculating risk failed to take into account the possibility of “six sigma” moves like the Black Friday crash. Indeed, that trend has only worsened with the advent of ETFs and high-frequency trading, which many market strategists believe increase the likelihood of chaotic selloffs like the May 2010 flash crash.

“After the event, I knew that all this stuff you learn in class, the Black-Scholes model, is useless…”

Asked what was going through his head when equity valuations were plummeting all around him, Taleb replies that he was so focused, he wasn't able to process the enormity of that day’s events while they they were happening. All of his attention was focused on executing trades.

“When you’re trading, it’s like being in a battle. It’s like TV. When I’m watching TV, I don’t know what’s happening during the episode. It’s not until later that I find out. I was in a state of heightened concentration."

It wasn’t until a colleague pointed out the magnitude of the move that Taleb began to understand that this might be a once-in-a-lifetime opportunity.

“Someone came to me and made a remark…something like don’t they know that six sigmas are something you only observe once in your lifetime?”

Indeed, it would be 20 years before Taleb would book similarly outsized profits after he joined a handful of contrarians in shorting the market ahead of Lehman Brothers’s September 2008 bankruptcy filing.

As for the extreme focus he exhibited on that day, Taleb said there have been a handful of occasions where he has had to maintain a monk-like level of focus for a prolonged period. He cited the invasion of Kuwait as one example, saying he arrived at First Boston’s office at 2 am, and remained in a state of concentration for 15 or 16 hours.

Ultimately, he says, traders are still underestimating the likelihood of another flash crash. Given the fact that realized volatility recently fell to record lows, this year’s relatively placid equity market has fostered a widespread sense of complacency in markets.

But that could all change in 24 hours’ time.
 

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Authored by Mike Shedlock via MishTalk.com,

Iowa seeks to become the first state to dump Obamacare in favor of a state-run program that will allegedly lower costs.

I suggest Iowa's replacement plan can't work. My reason pertains to the title question.

No Medical Insurance Available

 

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