Category: zerohedge

Protesters Swarm Celebrity-Studded Barclays Center Where A Cop Just Pepper Sprayed Himself By Mistake: Live Feed

Tonight, the Barclays Center in Brooklyn, where the Nets and the Cavaliers are playing, is quite a sight.

On one hand, inside we have the US “royal family” present:

… as well as the equally famous UK royals visiting from England:

Meanwhile, another King is down on the court, even if  in protest:

Meanwhile, other “protesters” have gathered outside…

… and are proceeding to engage the police.

… as well as attempting the now traditional looting of any local retail outlets:

As for the punchline: until this moment Emergency Medical Services were waiting on standby, when this happened:

Or just the right amount of comic ineptitiude to either diffuse the tense situation or to result in something far more dangerous, especially with all the celebrities already present and accounted for.

Watch what happens with the following life feed.

Broadcast live streaming video on Ustream




via Zero Hedge http://ift.tt/1w9sl6O Tyler Durden

Meet China’s Morlocks: 1 Million Beijing Residents Live Undeground

For an estimated 1 million Beijing residents, dubbed the "rat tribe", living above ground (or in ghost cities) is a luxury they simply cannot afford. As NPR reports, with even the tiniest apartment costing a fortune (and 21 million people fighting for space), there has emerged a new 'affordable' housing option… below the city's bustling streets. Thanks to building codes that force the creation of basements and bomb shelters under new residences, there's a lot of underground space (1 – 3 floors down) that is illegally – but affordably – used for habitation. With the Shanghai Composite stock index up over 40% year-to-date, creating wealth and trickling down, how can this be possible?

 

 

As NPR reports,

[In Beijing] it is possible to find more affordable housing. You'll just have to join an estimated 1 million of the city's residents, and look underground.

 

Below the city's bustling streets, bomb shelters and storage basements are turned into illegal — but affordable — apartments.

 

…

 

Annette Kim, a professor at the University of Southern California who researches urbanization, spent last year in China's capital city studying the underground housing market.

 

 

"Part of why there's so much underground space is because it's the official building code to continue to build bomb shelters and basements," Kim says. "That's a lot of new, underground space that's increasing in supply all the time. They're everywhere."

 

She says apartments go one to three stories below ground. Residents have communal bathrooms and shared kitchens. The tiny, windowless rooms have just enough space to fit a bed.

 

"It's tight," Kim says. "But I also lived in Beijing for a year and the city, in general, is tight."

 

With an average rent of $70 per month, she says, this is an affordable option for city-dwellers.

 

But living underground is illegal, Kim says, since housing laws changed in 2010.

 

 

Read more here…

And, in addition, there's a stigma to living in basements and bomb shelters, as Kim found when she interviewed residents above-ground about their neighbors directly below.

"They weren't sure who was down there," Kim says. "There is actually very little contact between above-ground and below-ground, and so there's this fear of security."

 

In reality, she says, the underground residents are mostly young migrants who moved from the countryside looking for work in Beijing.

 

"They're all the service people in the city," she says. "They're your waitresses, store clerks, interior designers, tech workers, who just can't afford a place in the city."

But it's rare to get a glimpse below. Property owners can be strict about whom they let in. But Beijing-based photographer Chi Yin Sim found a way. She's documented life under the city in a collection called China's "Rat Tribe."

 

"I started to try and find ways to get down there because I was fascinated by the fact that there was a universe beneath our feet," Sim says.

 

The first basement-dweller she met was a young woman, a pedicurist at a salon, who lived with her boyfriend.

 

"I was just like, 'Can I come and visit?' And she was like, 'Sure, come and visit us,' " Sim says.

 

The couple lived two floors below a posh Beijing apartment complex.

 

 

Sim's photos show just how tiny these units really are. The couple sits on their bed, surrounded by clothes, boxes and a giant teddy bear. There's hardly any room to move around.

 

"The air is not so good, ventilation is not so good," Sim says. "And the main complaint that people have is not that they can't see the sun: It's that it's very humid in the summer. So everything that they put out in their rooms gets a bit moldy, because it's just very damp and dank underground."

 

…

 

 

But despite the laws against living underground, and the discomfort and shame associated with it, Kim says it's still a very active market. For hundreds of thousands of people, it's the only viable option for living in, or under, Beijing.

 

 

See more image here…

Source: NPR

*  *  *

So much for that urbanization route to responsible growth… it's too late. Global hot money has squeezed an entire generation of service workers out from ever achieving the American/Chinese dream.




via Zero Hedge http://ift.tt/1z0MI7n Tyler Durden

Young American Adults: Then And Now, In Charts

It was a little over month ago when we presented our visual guide to the Millennial generation. Since then, dissecting America’s overindebted, overeducated, underqualified, underemployed, underpaid young adults – if only in charts – has become one of the nation’s favorite pastimes. And so, courtesy of the US Census Bureau which too has taken a fascination with the sad plight of the one generation that, at least in theory, should carry the weight of the US economy on its shoulders, is the latest demographic dressing down of Americans aged 18 to 34.

Percent of population aged 18 to 34

 

Percent of total population age 18 to 34 who are non-Hispanic, White


 

Percent of population age
18 to 34 who reported their ethnicity and race as something other than
non-Hispanic White. 

 

Percent of total population age 18 to 34 years who are foreign born

 

Percent of total population age 18 to 34 who speak a language other than English at home

 

Percent of civilian population age 18 to 34 who are veterans

 

Percent of population age 18 to 34 living alone

 

Percent of total population age 18 to 34 who never married

 

Living With a Parent, Age 18 to 34

 

 

Percent of total population age 18 to 34 years with bachelor’s degree or higher


 

Percent of total population age 18 to 34 who are employed

 

Median earnings for population age 18 to 34 with earnings who worked full-time, year-round (in 2013 inflation-adjusted dollars)

 

Percent
of total population age 18 to 34 for whom poverty status is determined
with income in the past 12 months below poverty level

 

And while the trends should be clear enough by now, those who seek an even more in-depth analysis can do so at the following interactive map:




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How To Reduce Police Violence – Eliminate Nanny State Crimes

Authored by Stephen L Carter via Contra Corner, originally posted at Bloomberg View,

On the opening day of law school, I always counsel my first-year students never to support a law they are not willing to kill to enforce. Usually they greet this advice with something between skepticism and puzzlement, until I remind them that the police go armed to enforce the will of the state, and if you resist, they might kill you.

I wish this caution were only theoretical. It isn’t. Whatever your view on the refusal of a New York City grand jury to indict the police officer whose chokehold apparently led to the death of Eric Garner, it’s useful to remember the crime that Garner is alleged to have committed: He was selling individual cigarettes, or loosies, in violation of New York law.

The obvious racial dynamics of the case — the police officer, Daniel Pantaleo, is white; Garner was black — have sparked understandable outrage. But, at least among libertarians, so has the law that was being enforced. Wrote Nick Gillespie in the Daily Beast, “Clearly something has gone horribly wrong when a man lies dead after being confronted for selling cigarettes to willing buyers.” Republican Senator Rand Paul of Kentucky, appearing on MSNBC, also blamed the statute: “Some politician put a tax of $5.85 on a pack of cigarettes, so they’ve driven cigarettes underground by making them so expensive.”

The problem is actually broader. It’s not just cigarette tax laws that can lead to the death of those the police seek to arrest. It’s every law. Libertarians argue that we have far too many laws, and the Garner case offers evidence that they’re right. I often tell my students that there will never be a perfect technology of law enforcement, and therefore it is unavoidable that there will be situations where police err on the side of too much violence rather than too little. Better training won’t lead to perfection. But fewer laws would mean fewer opportunities for official violence to get out of hand.

The legal scholar Douglas Husak, in his excellent 2009 book “Overcriminalization: The Limits of the Criminal Law,” points out that federal law alone includes more than 3,000 crimes, fewer than half of which found in the Federal Criminal Code. The rest are scattered through other statutes. A citizen who wants to abide by the law has no quick and easy way to find out what the law actually is — a violation of the traditional principle that the state cannot punish without fair notice.

In addition to these statutes, he writes, an astonishing 300,000 or more federal regulations may be enforceable through criminal punishment in the discretion of an administrative agency. Nobody knows the number for sure.

Husak cites estimates that more than 70 percent of American adults have committed a crime that could lead to imprisonment. He quotes the legal scholar William Stuntz to the effect that we are moving toward “a world in which the law on the books makes everyone a felon.” Does this seem too dramatic? Husak points to studies suggesting that more than half of young people download music illegally from the Internet. That’s been a federal crime for almost 20 years. These kids, in theory, could all go to prison.

Many criminal laws hardly pass the giggle test. Husak takes us on a tour through bizarre statutes, including the Alabama law making it a crime to maim oneself for the purpose of gaining sympathy, the Florida law prohibiting displays of deformed animals, the Illinois law against “damaging anhydrous ammonia equipment.” And then there’s the wondrous federal crime of disturbing mud in a cave on federal land. (Be careful where you run to get out of the rain.) Whether or not these laws are frequently enforced, Husak’s concern is that they exist — and potentially make felons of us all.

Part of the problem, Husak suggests, is the growing tendency of legislatures — including Congress — to toss in a criminal sanction at the end of countless bills on countless subjects. It’s as though making an offense criminal shows how much we care about it.

Well, maybe so. But making an offense criminal also means that the police will go armed to enforce it. Overcriminalization matters, Husak says, because the costs of facing criminal sanction are so high and because the criminal law can no longer sort out the law-abiding from the non-law-abiding. True enough. But it also matters because — as the Garner case reminds us — the police might kill you.

I don’t mean this as a criticism of cops, whose job after all is to carry out the legislative will. The criticism is of a political system that takes such bizarre delight in creating new crimes for the cops to enforce. It’s unlikely that the New York legislature, in creating the crime of selling untaxed cigarettes, imagined that anyone would die for violating it. But a wise legislator would give the matter some thought before creating a crime. Officials who fail to take into account the obvious fact that the laws they’re so eager to pass will be enforced at the point of a gun cannot fairly be described as public servants.

Husak suggests as one solution interpreting the Constitution to include a right not to be punished. This in turn would mean that before a legislature could criminalize a particular behavior, it would have to show a public interest significantly higher than for most forms of legislation.

He offers the example of a legislature that decides “to prohibit — on pain of criminal liability — the consumption of designated unhealthy foods such as doughnuts.”  The “rational basis test” usually applied by courts when statutes face constitutional challenge would be easily met. In short, under existing doctrine, the statute would be a permissible exercise of the police power. But if there existed a constitutional right not to be punished, the statute would have to face a higher level of judicial scrutiny, and might well be struck down — not because of a right to eat unhealthy foods, but because of a right not to be criminally punished by the state except in matters of great importance.

Of course, activists on the right and the left tend to believe that all of their causes are of great importance. Whatever they want to ban or require, they seem unalterably persuaded that the use of state power is appropriate.

That’s too bad. Every new law requires enforcement; every act of enforcement includes the possibility of violence. There are many painful lessons to be drawn from the Garner tragedy, but one of them, sadly, is the same as the advice I give my students on the first day of classes: Don’t ever fight to make something illegal unless you’re willing to risk the lives of your fellow citizens to get your way.




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What The Fed’s Shift From “Considerable Period” To “Patient” Means

Via Goldman Sachs’ Jan Hatzius,

1. The stellar 321,000 payroll gain, the strong ISMs, and the surge in the Philly Fed have pushed our current activity indicator (CAI) up to 4.4% for November so far, from 4.3% in October. In contrast, real GDP is on track for much slower growth this quarter, only 2.4% according to our latest estimate. The truth might lie somewhere in between; although the CAI has proven itself as a timelier and more accurate gauge than the often-erratic GDP numbers, we are not quite ready to believe yet that the economy is growing as much as 2 percentage points above trend, and would also put some weight on the weaker GDP signal in this instance. Our forward-looking view remains GDP growth of about 3%, not just in 2015 but also in 2016-2017.

2. Although it is still a close call, the strong employment numbers suggest that the FOMC will make some changes to its “considerable time” forward guidance at the December 16-17 meeting. This forecast is based on three considerations. The first is our reading of the leadership’s own expectations for the liftoff date, which still seem clustered around mid-2015 judging from NY Fed President Dudley’s speech last week. The second is our translation of the “considerable time” phrase as “no hikes for a minimum period that might be on the order of six months, subject to the recovery proceeding broadly in line with expectations.” Together with the first consideration, this suggests that the committee would want to change the language before the March meeting. And the third is that it might be awkward to make significant changes to the language at the January meeting which does not feature a press conference (at least based on the current schedule).

3. So how will the language change? In the 2003-2004 playbook, “considerable period” gave way to “patient” as a signal that the hikes were drawing closer, and it is interesting that the words “patient” or “patience” have shown up quite frequently in recent Fed speeches. The problem with a simple shift to “patience” without any qualifications on December 17 is that back in 2004 this shift occurred just 4½ months before the first hike, and some market participants might therefore take it to mean a hike before June. We doubt that the FOMC would be comfortable sending such a signal, especially given the decline in both inflation breakevens and survey inflation expectations in recent months. One simple way out for the committee would be to say explicitly that the shift to “patience” (or some similar term) reflects the ongoing progress in the recovery along the forecasted path and is not intended to convey an earlier liftoff date than the previous language.

4. Beyond the question of what will happen at the December 16-17 meeting, our own baseline forecast remains liftoff in September 2015, followed by a somewhat steeper and ultimately bigger increase in the funds rate than currently discounted in the yield curve. We have not made any changes to this forecast, because we have not changed our basic outlook for the economy. Despite the acceleration in payroll growth, the reduction in labor market slack as measured by the household survey remains on the same track as before. We still expect the broad underemployment rate U6 to fall from 11.4% now to 9% (our estimate of the full-employment level) sometime in the first half of 2016. If payroll growth stays near the levels in Friday’s report, the convergence to full employment would probably accelerate. But that is not our expectation at this point.

5. The wage picture also remains consistent with still-significant slack and thus with a strong case for a later liftoff. There was a lot of excitement on Friday about the 0.4% gain in average hourly earnings in November, but this looks somewhat misplaced. For one thing, the year-on-year rate remains at just 2.1%, roughly where it has been all year. More importantly, the strength was only visible in the “all workers” series but not in the more stable “production and nonsupervisory workers” series which enters our wage tracker alongside the employment cost index and compensation per hour. The tracker continues to grow just 2¼%, well below the 3%-4% rate that Fed Chair Janet Yellen identified as “normal” earlier this year.

6. The combination of still-significant slack and a modest amount of pass-through from commodity prices and the dollar should keep core inflation at 1½% next year. Although our forecast is ¼ point below the FOMC’s view, we think the risks to it are, if anything, tilted to the downside because of the ongoing slide in commodity prices, the likelihood that the dollar will appreciate further, and the signs that the drop in headline inflation is weighing on inflation expectations. If inflation does stay below the committee’s forecast, we would expect it to push back the liftoff date at least a little, to September or later.

7. Our longer-term expectation remains that the funds rate will return to nearly 4% nominal/2% real by late 2018, well above the 2½% nominal/½% real levels now discounted in the Eurodollar futures market. A 4% nominal/2% real rate would be consistent with long-term norms both in the United States and in other developed economies, and would in fact incorporate a small discount relative to those numbers to account for the fact that potential growth is a bit lower now. (We do not view a large discount as appropriate, partly because the link between potential growth and the neutral rate is more tenuous than widely believed.) Moreover, we read the acceleration in US growth in 2014 as preliminary evidence against the notion that the weakness in economic growth post 2007 was “secular” and in favor of our view that it was due to a lengthy but ultimately temporary hangover associated with the bursting of the housing and credit bubble. This hangover was the reason why it has taken us 5 years to get to a point in the business expansion that is typically reached in 1-2 years. But the flip side of the slow initial progress is that the expansion—and the rate hike cycle that will ultimately accompany it—still has a long way to go.

 

*  *  *

Always the hockey-stick, always the recovery around the corner… just like in Japan… until even Goldman folded on that fallacy.




via Zero Hedge http://ift.tt/1D11y2A Tyler Durden

Did Blackstone Just Call The Top In Commercial Real Estate?

Blackstone’s well-timed IPO in 2007 was almost the perfect top-tick indicator as ‘the smart money’ private-equity guys cashed out into the public markets at peak euphoria. Earlier this year we noted that, among others, Blackstone was drastically ratcheting down purchases (and in fact selling what it could) US residential real estate – and with it withdrew the only pillar holding up the housing market. And now, in the biggest deal in 7 years, Blackstone is dumping a $3.5 billion commercial real estate portfolio. Given the recent declines in CMBX pricing, perhaps, once again, Blackstone is calling the top in another bubble…

 

CMBX prices have been sliding for mezz tranches in recent months as last year’s yield at any price market rolls over…

 

So is Blackstone calling the top with this deal? (via Bloomberg)

Blackstone  agreed to sell 26 Northern California buildings to Hudson Pacific Properties for $3.5 billion in its latest deal to exit office holdings acquired seven years ago near the market’s peak.

 

Hudson Pacific, based in Los Angeles, agreed to pay $1.75 billion in cash for the properties and the rest in stock, giving Blackstone about a 48 percent stake in the real estate investment trust, the companies said in a statement today.

 

The acquisition of the properties, in the San Francisco area and Silicon Valley, “perfectly aligns with our strategy to acquire high-quality office properties in West Coast markets poised for continued growth through off-market transactions,” Victor Coleman, Hudson Pacific’s chairman and chief executive officer, said in the statement.

 

Blackstone, the biggest U.S. office landlord, has been selling assets from its 2007 acquisition of Equity Office Properties Trust as occupancies increase and rents recover from the real estate crash. The Hudson Pacific transaction marks the private-equity firm’s biggest sale of office buildings since just after the $39 billion Equity Office takeover, when it flipped many of the properties to reduce debt.

This is not Blackstone’s first sale…

Blackstone in November agreed to sell a 42-story office building on Manhattan’s Bryant Park to an Ivanhoe Cambridge venture for about $2.25 billion, according to two people with knowledge of the deal. The sale would be the largest of a whole U.S. office property since a group led by Boston Properties Inc. purchased the General Motors Building in New York for a record $2.8 billion in 2008, according to Real Capital Analytics Inc.

 

In September, Blackstone sold five office buildings in the Boston area to investors led by Oxford Properties Group, a unit of the Ontario Municipal Employees Retirement System, for about $2.1 billion.

*  *  *

Who’s the greater fool?




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Q3 2014 Earnings Breakdown – Do You Still Believe In Miracles?

Submitted by Lance Roberts via STA Wealth Management,

With the third quarter earnings reports for the S&P 500 now in, I can update my quarterly analysis of earnings and estimate trends through the 3rd quarter of 2014.

Third quarters results were improved over Q2 as activity continued its rebound following the exceptionally cold winter season.  For the quarter, operating earnings rose from $29.34 per share to $29.75 which translates into a quarterly increase of 1.4%. While operating earnings are widely discussed by analysts and the general media; there are many problems with the way in which these earnings are derived due to one-time charges, inclusion/exclusion of material events, share buybacks and accounting gimmickry to "beat earnings."

Therefore, from a historical valuation perspective, reported earnings are much more relevant in determining market over/undervaluation levels. On a reported basis, earnings improved from $27.14 to $27.64 or 1.84% from the first quarter.

The rise in both operating and reported earnings for the quarter brought the trailing twelve months earnings per share to $114.66 from $111.83, a 2.53% increase, on an operating basis. The trailing twelve month reported earnings rose by $3.01 from $103.12 to $106.13, an increase of 2.92%.

Importantly, the rebound in Q3 earnings is consistent with the rebound/slowdown recovery that has been the hallmark of the economic cycle following the financial crisis. Historically, these large rebounds in earnings have tended to be one-quarter events followed by a marked slowdown in subsequent growth rates. 

SP500-Oper-Rpt-Earnings-Chg-Qtr-120814

However, while the headline earnings numbers were strong in the third quarter; digging into the details revealed a bit more troubling picture.

Always Optimistic

There is one commodity that Wall Street always has in abundance, "optimism." When it comes to earnings expectations, estimates are always higher regardless of the trends of economic data.  The problem is that the difference between expectations and reality have been quite dramatic.  In a recent missive entitled the "4 Tools Of Corporate Profitability" I stated:

"There is no doubt that corporate profitability has surged from the recessionary lows.  However, if I am correct in my assessment, then the recent downturn in corporate profitability may be more than just due to an economic 'soft patch.'  The problem with cost cutting, wage suppression, labor hoarding and stock buybacks, along with a myriad of accounting gimmicks, is that there is a finite limit to their effectiveness.  While Goldman Sachs expects profits to surge in the coming years ahead – history suggests something different."

The chart below compares economic growth (forward projections are at 2% annualized) to earnings growth. Wall Street has always extrapolated earnings growth indefinitely into the future without taking into account the effects of the normal economic and business cycles.  This was the same in 2000 and 2007. Unfortunately, the economy neither forgets nor forgives.

Earnings-Estimates-GDP-090114

With estimates once again in the stratosphere, and not one Wall Street analyst expecting a recession at any point the future, it is only a function of time until the next major reversion occurs. To visualize the current extremes in earnings estimates, we can view the long term cyclicality of earnings. As shown in the next chart, earnings tend to cycle regularly between 6% peak to peak and 5% trough to trough growth in earnings. With 2015 expectations exceeding the current 6% peak to peak growth rate, it is only a question of what will trip up this overly optimistic picture.

Estimated-Earnings-Growth-120814

As I wrote in "Not All That It Seems," the drivers behind the growth in earnings are not entirely organic.  I have extended the chart to 2020 showing Jeff Saut's recent extrapolated earnings growth trend. The idea of "permanent liquidity," and the belief of sustained economic growth, despite slowing in China, Japan and the Eurozone, has emboldened analysts to push estimates of corporate profit growth of 6% annually through 2020. Such a steady rise in earnings per share would push levels to more than $183.00 per share. The problem is that such an earnings expansion has never occurred in history as it completely disregards the course of normal business and economic cycles.

The problem with forward earnings estimates is that they consistently overestimate reality by roughly 33% historically. The chart below shows the consistently sliding revisions of analyst expectations versus the reality of corporate profitability. At the beginning of 2012, it was estimated that by Q4 of 2013 reported earnings would reach $106.16. However, 2013 ended at just $100.20 as the economy failed to recover as expected. Despite a more dismal outlook in corporate earnings, stock prices have rocketed higher from the continued interventions from Central Banks globally.

Currently, estimates for the end of 2014 have once again began to get knocked down. At the beginning of 2013 it was estimated that 2014 would end at $121.40 versus the June, 2014 estimate of just $114.39. However, just three months later, the 2014 year-end estimate has been reduced to just $110.10. Currently, as of the end of November, that year-end estimate is sitting at $109.67 as economic growth has once again failed to materialize as expected.

Earnings-Estimates-Forward-120814

Currently, year-end 2015 estimates are at almost $135 on a reported basis which suggests that earnings will surge by 23% in the next twelve months. Decisions made today, based on those expectations, will most likely lead to overpaying for investments as forward estimates are lowered to meet with economic realities in the months ahead.

Given that earnings are what investors are pay for, the price of the market should be a reflection of earnings growth over time. As shown below, the S&P 500 has tended to somewhat "lag" peaks in earnings growth. However, due to the massive interventions by Central Banks, asset prices have run well ahead of earnings growth expected into 2015. Furthermore, the deviation in earnings from the long-term growth trend are at levels never witnessed before in history.

With prices well ahead of expectations, and expectations well deviated from historical norms, it is unlikely that this ends well.  While there are many that suggest that "this time is different" due to accounting changes, Central Bank stimulus, and low interest rates, history suggests this unlikely to be the case.

Earnings-Deviation-Growth-SP500-120814

Accounting Magic

What has also been stunning is the surge in corporate profitability despite a lack of revenue growth.  Since 2009, the reported earnings per share of corporations has increased by a total of 268%. This is the sharpest post-recession rise in reported EPS in history. The issue is that the sharp increase in earnings did not come from a similar surge in revenue that is reported at the top line of the income statement. Revenue from sales of goods and services has only increased by a marginal 33% during the same period.

Accounting-Magic-120814

In order for profitability to surge, despite rather weak revenue growth, corporations have resorted have resorted to using debt to accelerate share buybacks. The chart below shows the total number of outstanding shares as compared to the difference between operating earnings on a per/share basis before and after buybacks.

SP500-Earnings-Buybacks-120814

However, companies are not just borrowing to complete share buybacks but also to issue out dividends. According to the most recent S&P 500 company filings, the level of cash dividends per share has now reached $10.02 which is the highest level on record. It is also the greatest deviation from the long-term trend of dividends per share since the financial crisis (highlighted in blue.)

SP500-Dividends-120814

The reality is that share buybacks create an illusion of profitability. If a company earns $0.90 per share and has one million shares outstanding – reducing those shares to 900,000 will increase earnings per share to $1.00. No additional revenue was created; no more product was sold, it is simply accounting magic. Such activities do not spur economic growth or generate real wealth for shareholders. However, share buybacks and cash dividends provide the basis to keep Wall Street satisfied, and stock option compensated executives and large shareholders happy. 

As I discussed at length in my recent report on "Evaluating 3 Bullish Arguments:" 

"There is virtually no 'bullish' argument that will currently withstand real scrutiny. Yield analysis is flawed because of the artificial interest rate suppression. It is the same for equity risk premium analysis. Valuations are not cheap, and rising interest rates will slow economic growth.  However, because optimistic analysis supports our underlying psychological 'greed,' all real scrutiny to the contrary tends to be dismissed. Unfortunately, it is this 'willful blindness' that eventually leads to a dislocation in the markets."

The underpinnings of current earnings growth are something worth watching closely. The recent improvement in the economic reports is likely more ephemeral due to a very sluggish start of the year that has led to a "restocking" cycle. The sustainability of that uptick in the economic data is crucially important if the economy is indeed turning a corner toward stronger growth. Unfortunately, with deflationary pressures rising in the Eurozone, Japan and China, the Affordable Care Act about to levy higher taxes on individuals, and labor slack remaining stubbornly high it is likely that a continuation of a "struggle" through economy is the most likely outcome. This puts overly optimistic earnings estimates in jeopardy of being lowered further in the coming months ahead as stock buybacks slow and corporate cost cutting becomes less effective.
 

 




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Alleged Chemical Attack Sends ‘Furries’ Flying In Chicago

In a particularly vicious alleged chemical attack, thousands of MidWest FurFest “Furries” – the term for people who dress up in expensive animal costumes and role-play (sometimes sexually) as anthropomorphic critters – were evacuated when chlorine gas was released in the Chicago Hyatt hotel in which they were nesting. As AP reports, authorities are investigating the release of a gas that sent 19 “people dressed like dogs and foxes,” as a criminal matter – as someone apparently intentionally left chlorine powder in a ninth-floor hotel stairway, causing the gas to spread. Does give one paws for thought though, eh?

 


Authorities are investigating the release of a gas that sickened several hotel guests and forced thousands of people – many dressed as cartoon animals – to evacuate the building.

Vice reports,

The Midwest FurFest drew 4,600 attendees this year, which means a lot of people stood to be poisoned if the apparent attack were successful. Luckily, the leak was obvious due to the chemical’s pungent odor, and attendees were evacuated from the Chicago-area Hyatt about 30 minutes after the leak was detected shortly after midnight. Chlorine exposure can cause symptoms ranging from blurry vision to a condition called acute lung injury, and in up to 1 percent of exposure cases, people die.

 

A ?hazmat team found the source of the gas in a hotel stairwell—a pile of powdered chlorine—and the incident sent 19 people, who were complaining of dizziness and other medical issues, to the hospital. (A police investigation into who put the chlorine there is ongoing.)

 

By 4:21 AM, the Rosemont Police Department gave the all-clear and allowed the furries to continue their party. ” As we wake up today we want to continue to provide the best possible convention that we can, despite the trying circumstances,” FurFest organizers said in a ?statement. “We ask you to continue to be patient, and remember that the volunteers who make Midwest FurFest happen intend to give 110 percent to make sure that the fun, friendship, and good times of Midwest FurFest 2014 overshadow last night’s unfortunate incident.”

But as AP adds, the furries do not seem worried that this is the starte of trend…

Kit McCreedy, a 28-year-old from Madison, Wisconsin, said he didn’t think the incident would further disrupt Midwest FurFest, which was in its final day.

 

“I think we’ll recover from this,” said McCreedy, his fox tail swinging behind him as he headed back inside. “People are tired but they’re still full of energy.”

 

Others said they didn’t know why anyone would try to upset the convention that includes dance contests and panel discussions on making the costumes. Some pointed out that the brightly colored outfits are made from fake fur and foam.

 

“Nobody uses real fur,” said Frederic Cesbron, a 35-year-old forklift operator who flew to Chicago from his home in France. He attended the convention dressed in a fox outfit that he said is worth about $3,000.

*  *  *

*  *  *

Some folks are furrying…




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Just Two Charts

Both short-term and long-term, the large liquid US stock market indices have become massively decoupled from the bond and credit markets. Since the former is supposed to discount a combination of the latter (macro growth/de-growth from bonds and micro business-risk/cash-flow-sustainability from credit), one has to wonder which reality will come to pass…

 

Short-term…

 

Long-term…

 

Do either of these charts look ‘normal’? Sustainable?

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Simply put – for American companies, despite the fall in Treasury yields, the cost of borrowing (i.e. interest rates) has already started to increase rather dramatically and that’s not just energy names.

Charts: Bloomberg

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Don’t worry though, it’s different this time…




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