Warning: the Biggest Trend of the Next 12 Months Has Hit

The single biggest trend for the next year or so will be the collapse of the $USD.

The fact is that the Fed will be forced to walk back its hawkishness. Indeed, this process has already begun with Janet Yellen testifying before Congress that the Fed was just about done with rate hikes.

Bear in mind, the $USD had already dropped 8% year to date during a period in which the Fed had hiked rates TWICE.

So what will happen to the $USD when the Fed walks back its hawkishness and slows down the pace of rate hikes… or even STOPS hiking altogether?

Again… the $USD is set to collapse. And as it does, inflation plays will be EXPLODING higher.

If you’re not taking steps to actively prepare your portfolio for this, you need to so now.

We just published a Special Investment Report concerning a secret back-door play on Gold that gives you access to 25 million ounces of Gold that the market is currently valuing at just $273 per ounce.

The report is titled The Gold Mountain: How to Buy Gold at $273 Per Ounce

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Today there are just 87 left.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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Daily Trading Volume In Bitcoin Surpasses GLD

Several weeks after Goldman’s chief technician started covering bitcoin, overnight Bank of America has released what some may call an “initiating coverage” report on bitcoin which notes that while the cryptocurrency remains very volatile and risky, bitcoin has experienced a spectacular surge in liquidity in the last six months. However, BofA remains stumped when it comes to making any official forecasts BofA’s commodity strategist Francisco Blanch writes that bitcoin is uncorrelated to any financial asset, “so there is no way to explain let alone predict returns.”

While we will present some of the more notable findings from the report shortly, one observation caught our attention, namely that in at least one regard, bitcoin has already surpassed gold: the total daily trading bolume for bitcoin has now surpassed that of the biggest gold ETF, the GLD.

As BofA notes, “it is hard to ignore that trading volumes for major digital currencies like bitcoin and ethereum have skyrocketed in recent years. For example, daily trading volumes for bitcoin were $400mn in 2012 and have now moved up to about $2bn a day at present” which also means that – at current BTC prices – the total ADV of BTC traded is higher than that of GLD.

BofA continues:

Meanwhile, ethereum had daily trading volumes of $1.5mn when it first launched in 2015 and it is now experiencing daily trading of about $1bn. Most importantly, for a digital token to become a currency, it must build to a certain scale, a bit like the silver mine in Bolivia found by the Spanish. In some ways, this is exactly what has been happening in recent quarters, with the total market value of digital tokens growing exponentially from $1.5bn to around $87bn at present.

And while Bitcoin liquidity still has a ways to go before catching up to equity and fixed income markets, BofA does note that there is a distinct overlap in the historical price pattern of gold with that of bitcoin:

A big uncertainty facing bitcoin and other digital tokens we see is their expected real rate of return. So far, early adopters have enjoyed a sharp appreciation in prices. While bitcoin seems to have followed a pattern similar to gold over a much more compressed time period (Chart 18), there is no certainty that that will continue and, most certainly, no way to predict it. Also, there are large inherent risks to digital tokens such as fraud, hacking, outright theft, new protocol adoption, limited acceptance, and it is not legal tender in many places in the world.

As Blanch summarizes, “put differently, cryptocurrencies have built scale rapidly and are now accepted as a means of payment by some corporations and individuals.”

The only question is if, and when, will cryptos in their current iteration start being accepted by central banks, and more importantly, as pledgeable collateral. More on that shortly.

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Lawmakers Demand Jeff Sessions Investigate Backpage in Wake of Misleading Washington Post Article

The Washington Post has been playing right into politicians’ hands when it comes to the narrative about Backpage. A series of recent Post articles suggest a sinister plot by Backpage executives to promote human trafficking, when all the paper’s “trove of newly discovered documents” seems to show is that the company hired a firm to promote Backpage.com on foreign competitors’ sites.

“A contractor for the controversial classifieds website Backpage.com has been aggressively soliciting and creating sex-related ads, despite Backpage’s repeated insistence that it had no role in the content of ads posted on its site,” the Post opens one article—thereby kicking things off in a misleading manner.

While it will take the Post writers 21 more paragraphs to mention it, the contractors solicited all sorts of user-generated advertising for Backpage.com, not just sex-related or adult-oriented advertising.

The ads the contractors created, meanwhile, were either 1) posted to competitors’ sites—not Backpage—in a ploy to lure perusers of those sites to Backpage, or 2) draft ads made from existing copy on competitors’ sites. The contracting company, Philippines-based Avion BPO, would offer users of these other sites a free first listing on Backpage.com, along with a link to the draft ad that they could easily activate.

Based on this evidence, Post writers suggest that Backpage’s years of denials that the site “facilitated prostitution and child sex trafficking” could be a lie. But for all their breathless insinuations, the writers don’t actually tie a single Avion-brokered ad to illegal conduct, let alone harm against children.

From what the Post reveals, it’s also unclear whether Backpage even knew about the tactics Avion workers were using to generate new listings. It’s possible the contracting company came up with the bait-and-switch strategy on its own.

Regardless, Backpage’s claims to Congress and U.S. courts about its ad policies have always referenced U.S. content. Avion’s activity was relegated to overseas endeavors (and, since laws vary greatly from country to country when it comes to both internet content and prostitution, was not necessarily illegal at all). To use Avion as a bouncing-off point to open yet another U.S. federal inquiry into Backpage—as Reps. Ann Wagner (R-Missouri) and Carolyn Maloney (D-New York) are now doing—is purely opportunistic, as Avion’s creation or not of foreign ads is irrelevant for U.S. legal purposes.

Here in the United States, Senators recently spent more than a year pouring through internal Backpage documents related to adult-ad content. Yet nothing in their resulting report negates Backpage’s claims that the company does not create the content that appears on its site, nor does it show a company carelessly indifferent to its site’s content. Backpage repeatedly tweaked its automated filter and manual-review policies in an attempt to strike a balance between banning all “adult” content and giving free reign to ad posters. This is above and beyond what’s required by law in order to benefit from Section 230 protection.

Section 230 of the Communications Decency Act says that third-party web publishers and platforms are immune from liability if a user-posted ad results in criminal activity (with a few exceptions). It seriously limits the ability of opportunists in government and the general populace to take down any website or app they don’t like. Without Section 230 protection, most of the Internet would be vulnerable to frivolous civil lawsuits and severe prosecutorial overreach (such as charging Facebook as an accessory any time someone livestreams himself doing something illegal). And people like this letter writer could get their wish for lowly content screeners at social sites to be tried as collaborators should any illegal activity unwittingly get by.

Unsurprisingly, there are a lot of prosecutors, politicians, and other authorities who welcome the weakening of Section 230. This includes Sen. Claire McCaskill (D-Missouri), who told the Post that she hoped the Avion documents would open “the floodgates of liability for Backpage” because “nobody deserves it more.”

McCaskill was one of five U.S. lawmakers, including Reps. Maloney and Wagner and Sens. Rob Portman (R-Ohio) and Thomas R. Carper (D-Delaware), who last week petitioned Attorney General Jeff Sessions to launch an investigation into Backpage “for its criminal role in sex trafficking in America.”

Rep. Wagner is also the force behind the Section-230 amending H.R. 1865 (titled the “Allow States and Victims to Fight Online Sex Trafficking Act of 2017”). The bill would exempt web publishers and platforms from Section 230 protection if user-generated ads, posts, chats, etc., somehow facilitate sex trafficking by force/fraud/coercion or any person under age 18 soliciting something of value for sex. It would also:

  • Create a new federal crime: “publishing information provided by an information content provider with reckless disregard that the information is in furtherance of” or an attempt to engage in 1) sex trafficking by force, fraud, or coercion, and/or 2) prostitution involving someone under age 18 (regardless of whether their age is known)
  • Define “particpation in a sex trafficking venture” as any activity “that furthers or in anyway aids or abets” the participation of a minor in prostitution and/or sex-trafficking by force/fraud/coercion

The new publishing crime would come with a fine, imprisonment of up to 20 years, or both. The measure also specifically states that neither the federal government nor a plaintiff in a civil action must “prove any intenton the part of the information content provider” in order to satisfy the elements of the crime. (For more on the implications of the bill, see this post from law professor Eric Goldman.)

Sen. Portman recently cited the Post‘s Avion article on the Senate floor as evidence for the urgency of addressing Section 230 and Backpage. After falsely claiming that the Post had found “Backpage workers were active co-creators” of “many” ads “that seek to traffic women and underage girls,” Portman used his own fake news to advocate that Backpage “should lose their immunity under the Communications Decency Act.”

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Instapundit: Fire Sessions Over Civil Forfeiture Stance, Not Russia Recusal

University of Tennessee law professor Glenn Reynolds, better known as the Internet’s Instapundit, has harsh words for Attorney General Jeff Sessions. While President Trump has tweeted anger at Sessions for recusing himself from the ongoing investigation of ties between Russia and the 2016 election, Reynolds is ready to move on to something more important:

Under “civil forfeiture,” law enforcement can take property from people under the legal fiction that the property itself is guilty of a crime. (“Legal fiction” sounds better than “lie,” but in this case the two terms are near synonyms.) It was originally sold as a tool for going after the assets of drug kingpins, but nowadays it seems to be used against a lot of ordinary Americans who just have things that law enforcement wants. It’s also a way for law enforcement agencies to maintain off-budget slush funds, thus escaping scrutiny.

Sessions supports robust civil forfeiture and for having federal laws supersede state laws against seizing assets without charges. Reynolds again:

Some states have required that people be convicted of a crime before the government can seize their assets, but the feds have no such requirement. Congress should enact one. As the editors of National Review write:

“This is almost certainly unconstitutional, something that conservatives ought to understand instinctively. Like the Democrats’ crackpot plan to revoke the Second Amendment rights of U.S. citizens who have been neither charged with nor convicted of a crime simply for having been fingered as suspicious persons by some anonymous operative in Washington, seizing an American’s property because a police officer merely suspects that he might be a drug dealer or another species of miscreant does gross violence to the basic principle of due process.”

When even the conservatives at National Review, known for their love of “law and order,” are calling bullshit, it’s time to pull the plug. “The message it sends,” writes Reynolds, “is that the feds see the rest of us as prey, not as citizens. The attorney general should be ashamed to take that position. And, really, he should just be gone.”

Read the whole thing here.

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Rexit? Tillerson Reportedly Considering Early Exit Amid Trump Administration Chaos

Perpetual chaos within the Trump administration is apparently starting to take it’s toll on Secretary of State Rex Tillerson, at least according to some anonymous sources, and has prompted rumors that he may depart his post before the end of the year.  According to various media outlets, Tillerson has grown frustrated with his lack of autonomy, constant internal policy contradictions and public disputes between the White House and Attorney General Jeff Sessions, among other things.  Per Reuters:

Secretary of State Rex Tillerson has told friends he will be lucky to last a year in his job, according to a friend, while two officials said national security adviser H.R. McMaster was frustrated by what he sees as disorganization and indiscipline on key policy issues inside the White House.

 

A source familiar with the situation told Reuters that Tillerson was “very upset at not having autonomy, independence and control over his own department and the ability to do the job the way the job … is traditionally done.”

 

The source said he had heard nothing about any possible departure, but added: “The situation doesn’t seem to be getting any better, and in some respects appears to be getting worse.”

According to CNN‘s anonymous sources, Tillerson has told friends outside of Washington that he’d like to remain in his post through the end of the year though those same sources question whether another 5 months will be possible.

For weeks, conversations with Tillerson friends outside of Washington have left the impression that he, despite his frustrations, was determined to stay on the job at least through the end of the year. That would allow time to continue efforts to reorganize the State Department and would mean he could claim to have put in a year as America’s top diplomat.

 

But two sources who spoke to CNN on condition of anonymity over the weekend said they would not be surprised if there was a “Rexit” from Foggy Bottom sooner that that.

 

Both of these sources are familiar with Tillerson conversations with friends outside Washington. Both said there was a noticeable increase in the secretary’s frustration and his doubts that the tug-of-war with the White House would subside anytime soon. They also acknowledged it could have been venting after a tough week, a suggestion several DC-based sources made when asked if they saw evidence Tillerson was looking for an exit strategy.

Tillerson

 

Of course, Tillerson recently suffered an embarrassing contradiction from the White House over Qatar.  Following last month’s move by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt to boycott Qatar, which they accuse of financing extremist groups and supporting terrorism, Tillerson publicly asked the nations to ease their blockade, and put the onus on both sides to end the crisis.

Unfortunately, less than 90 minutes later, Trump accused Qatar of being a “high level” sponsor of terrorism in a press conference and suggested he had helped plan the Qatar action with Arab leaders.

Meanwhile, according to Reuters, Tillerson has also grown increasingly frustrated over internal criticisms surrounding the Iran deal.

Tillerson scored a policy win last week when the administration certified, albeit reluctantly, that Iran was complying with the 2015 nuclear deal under which Tehran agreed to restrain its atomic program in exchange for sanctions relief.

 

He was upset, however, by fierce internal criticism from Trump, as well as his chief strategist, Steve Bannon, and White House aide Sebastian Gorka, over the decision, said another U.S. official who spoke on condition of anonymity.

 

“The secretary does not feel that White House staff members should be in a position to conduct hostile cross-(examinations) of Cabinet officials,” the official said.

 

Hammond disputed the account of harsh discord between Trump and Tillerson regarding recertifying the Iran nuclear deal, saying: “I don’t buy this whole thing that there are tensions. Developing public policy is about vetting out ideas,” he said.

Not surprisingly, Tillerson’s spokesman has so far denied that the Secretary of State is considering an early exit…

R.C. Hammond, Tillerson’s spokesman, denied Tillerson was considering leaving or that his frustrations were boiling over, saying he had “plenty of reasons to stay on the job, and all of them are important to America.”

 

“There’s a desperate need for American leadership in the world and that’s where the secretary’s focusing his attention,” he said.

…so what say you?  Fake news or is Tillerson in a race with Sessions to see who will exit their post first?

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China Adds Troops To India Border, Will Defend Sovereignty At “Whatever Cost”

With attention focused on geopolitical tensions involving North Korea, the world may have missed that another, potentially more troubling conflict is brewing on the border between India and China, where as we reported over the weekend, China threatened with military action after a “blatant sovereignty infringement.” Since then tensions have grown, and on Monday China warned on Monday that it will step up its troop deployment in a border dispute with India, vowing to defend its sovereignty at “whatever cost”.

The latest standoff started more than a month ago after Chinese troops started building a road on a remote plateau, which is disputed by China and Bhutan.  Indian troops countered by moving to the flashpoint zone to halt the work, with China accusing them of violating its territorial sovereignty and calling for their immediate withdrawal.

The crossing of the mutually recognised national borders on the part of India… is a serious violation of China’s territory and runs against the international law,” Chinese defence ministry spokesman Wu Qian told a press conference quoted by AFP, adding that “the determination and the willingness and the resolve of China to defend its sovereignty is indomitable, and it will safeguard its sovereignty and security interests at whatever cost.”

He also said that “border troops have taken emergency response measures in the area and will further step up deployment and trainings in response to the situation,” without giving any details about the deployment.

Meanwhile, showing no signs that either nation is willing to relent, India and China both said they have foreign support for their positions on the conflict. As AFP adds, India-ally Bhutan has said construction of the road is “a direct violation” of agreements with China. Bhutan and China do not have diplomatic relations.

India, which fought a war with China in 1962 over a separate part of the disputed Himalayan border, supports Bhutan’s claim, although India should “not have any illusions” that its position will prevail, Wu said.

 

“The history of the PLA (People’s Liberation Army) over the past 90 years has proven that our resolve to safeguard (China’s) sovereignty and territory… are indomitable,” he said.  “It is difficult to shake the PLA, even more difficult than to shake a mountain.”

India and China have vied for strategic influence in South Asia, a key component of China’s “One Belt One Road” initiative, with Beijing ploughing large sums into infrastructure projects in Nepal, Sri Lanka and Bangladesh. Bhutan has remained closely allied to India.

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Stossel: Departments Grow and Cherries Rot [New at Reason]

The Agriculture Department actually forces farmers to dump cherries on the ground so you pay higher prices at the supermarket. John Stossel investigates and finds a ton of waste. The departments blow your money on welfare for the rich, global warming hype, and destructive regulations. Ed Stringham, President of the American Institute for Economic Research, tells Stossel about how the Agriculture Department even forced one farmer to dump cherries on the ground and let them rot. The government wanted to keep the price of cherries higher, which helps some cherry farmers.

Stossel on Reason

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Case-Shiller Home Prices Disappoint But Hit New Record High

Great news 'Murica – your house has never been worth more than it was in May (according to Case-Shiller's national home price index).

 

On the slightly less silver-lining side of the equation, April's 0.28% gain in price was revised to 0.18% MoM drop and May's proint disappointed at just 0.1% rise MoM.

The 20-city property values index increased 5.7% y/y (est. 5.8%).

All cities in the index showed year-over-year gains, led by a 13.3 percent advance in Seattle, an 8.9 percent increase in Portland and a 7.9 percent gain in Denver.

After seasonal adjustment, Seattle had the biggest month-over-month increase, at 0.9 percent, while New York posted a 0.6 percent decline.

“Home prices continue to climb and outpace both inflation and wages,” David Blitzer, chairman of the S&P index committee, said in a statement. “The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

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A.M. Links: Obamacare Vote in Senate, Trump Trashes Jeff Sessions, Russia Reportedly Arming Taliban

  • The Senate is expected to hold a procedural vote today on the Republican plan to repeal and replace Obamacare.
  • Former House Speaker John Boehner: Republicans are “not going to repeal and replace Obamacare…. It’s been around too long. And the American people have gotten accustomed to it.”
  • President Donald Trump is attacking Attorney General Jeff Sessions again on Twitter. “Attorney General Jeff Sessions has taken a VERY weak position on Hillary Clinton crimes (where are E-mails & DNC server) & Intel leakers!” Trump tweeted today.
  • “The Taliban have received improved weaponry in Afghanistan that appears to have been supplied by the Russian government, according to exclusive videos obtained by CNN, adding weight to accusations by Afghan and American officials that Moscow is arming their one-time foe in the war-torn country.”
  • China is strengthening its 880-mile border with North Korea.
  • Secretary of State Rex Tillerson is reportedly considering resigning from the Trump administration.

Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.

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Tracking The Great Escape From Cook County And Illinois

Authored by Mike Shedlock via MishTalk.com,

Cook County Illinois has the largest population loss of any county in the nation. Chicago represents just over half of the population of Cook County.

Here is a graph I put together of the “Great Escape” from Illinois.

Highlights

  • Between 2013 and 2016 the population of Illinois fell by 77,966. The population of Cook County fell by 36,739.
  • Between 2001 and 2016 the population of Illinois rose by 313,084. The population of Cook County fell by 122,759.
  • Starting in 2013, the “great escape” is in roughly equal numbers from Cook County and the rest of the state.

Job Highlights

On July 23 I noted Eight States Including Illinois Have Not Recovered Jobs Lost in Prior Recessions. The states are Alabama, Connecticut, Illinois, Michigan, Mississippi, New Mexico, Ohio, and Wyoming.

Illinois, Ohio, and Michigan are still below employment levels set in 2000. Here is a new chart I created comparing Illinois to Michigan and Ohio.

At least Illinois is not last in every category.

Metro Area Unemployment: Which States Are in Reverse? Spotlight Illinois

  • Illinois has 12 metro areas, none of which have unemployment rates below the national average.
  • Illinois worsened between 1998 and 2007 and then again from 2007 to 2017.
  • Neighboring states are all now better than Illinois

Illinois vs Neighboring States

For more details, please see Metro Area Unemployment: Which States Are in Reverse? Spotlight Illinois.

With each passing decade, the unemployment situation in Illinois has gotten worse.

This is not surprising. The state passed its first budget in three fiscal years, complete with massive tax hikes. The budget is required by Constitution to be balanced, but it isn’t.

An exodus of businesses and private citizens is underway. Reforms are desperately needed but none came with the passage of the budget.

Rauner 0-44

Governor Rauner is 0 for 44 in reforms he set out to accomplish. In fact, the corporate and personal tax hikes put the true score at -2 out of 44.

Cash-strapped cities suffer under prevailing wage laws and untenable pension promises.

Corporations suffer under the worst workers’ compensation laws in the nation.

Citizens suffer from the highest property taxes in the nation.

It is too late to save Illinois from insolvency. Rather than fix the problem, the new tax hikes will make matters worse.

Five Desperately Needed Reforms

  1. Municipal bankruptcy legislation
  2. Pension reform
  3. Right-to-Work legislation
  4. End of prevailing wage laws
  5. Workers’ compensation reform

Number one on my list of Illinois reforms is bankruptcy legislation. It is the only way out for numerous Illinois cities whose hands are tied by union-sponsored prevailing wage laws and pension plans.

Moody’s held off for now downgrading Illinois to junk status, but junk is baked into the cake sooner or later. The budget fixes nothing.

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