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Och-Ziff Capital Management put a five-year-long investigation by Department of Justice and Securities and Exchange Commission to rest last year when it agreed to pay a $412 million fine to settle allegations that its Africa unit violated the Foreign Corrupt Practices Act by paying more than $100 million in bribes to corrupt government officials. But even after slashing its management fee following a wave of customer redemptions, the publicly traded hedge fund is in rough shape. Its shares are languishing around $3, well below their peak of $26, and investors have pulled nearly a third of their assets from the fund, which had $32 billion AUM in May, down from more than $50 billion at its peak in 2015.

With the firm in dire need of rebranding, Dan Och, CEO and chairman of his eponymous firm, announced a major management shakeup back in February hoping it would help revive the firm's battered image. While Och retained his titles, much of the firm’ day-to-day operations would be handled by Jimmy Levin, the former star of its credit business, who would take over as co-chief investment officer. Och personally contributed 30 million of his shares – about one-third – to Levin's $280 million incentive package, a massive sum that Bloomberg noted is a rarity in Wall Street today.

Jimmy Levin

But in a profile of the newly minted hedge-fund heavyweight published Monday, Bloomberg questions whether Levin’s appointment was a calculated bet, or a reckless gamble by Och, who is struggling to win back investors’ trust after the federal government accused him personally of ignoring red flags that could’ve prevented the corruption scandal.

“Inside the firm, some seethed. Outside, they sneered; the move smelled a bit of desperation. Five months later, that remains the burning question: Is this a Hail-Mary stab by Och to win back his seat of dominance in the hedge-fund universe or a stroke of genius?

 

‘It’s a bet he’s making, just as he was making on any of his investments,’ said Adam Kahn, a managing partner at the executive-search firm Odyssey Search Partners. ‘Dan probably likes the risk-reward in the package he’s giving to Jimmy,’ who has become ‘for all intents and purposes the succession plan’ at Och-Ziff.”

Levin is facing a “sizable” challenge in trying to turn around Och-Ziff. However, there’s at least one item on Levin’s resume that would appear to justify the promotion: Levin previously helped run the firm’s credit business. And while that might not seem like a sensible path to leadership at a firm known for its equities expertise, Levin's appointment comes as Och-Ziff is rapidly transforming into a fixed-income shop, according to Bloomberg.

“The challenge Levin faces is sizable: to reverse the merciless bleeding of assets – and defections of personnel — triggered by Och-Ziff’s misconduct in the Democratic Republic of Congo, Libya and other African countries. If Levin makes it happen, it’ll be because he’s successful in his push to remake Och-Ziff, a firm long dominated by equity trades, into something of a fixed-income shop. The firm now has half of its $32 billion in assets tied to credit, including dedicated funds that have cropped up in just the past few years.

 

'We certainly weren’t known as a credit shop when I first met with clients,' Levin said recently from an Och-Ziff conference room overlooking Central Park, recalling when he was a twenty-something on the road trying to convince investors to part with their money. “Those early meetings weren’t the easiest in the world.”

Levin made his first big play in the aftermath of the financial crisis, when he convinced his then-boss and now co-CIO David Windreich, to bet on battered mortgage-backed securities, and, later, Spanish regional debt, that paid off big for the firm. Under Levin, the firm’s main credit fund has notched average gains of 13 percent since its 2011 inception. In 2012, Levin’s credit trades accounted for $2 billion – more than half of the firm’s total gains that year, according to Bloomberg. Levin was named global head of credit in 2013.

Dan Och

Of course, Levin’s gains sound less extraordinary when one remembers that they coincided with an extraordinary bull run in credit that’s persisted since shortly after the crisis. As a trader during normal market conditions, to which the Fed is promising a swift return, Levin is largely untested, which begs the question, what portion of Levin’s achievements should be ascribed to luck?

Levin’s peers appear uncomfortable with the question, perhaps for fear it could reflect poorly on their own returns.

“Was it luck? I don’t know, maybe, I’m not sure it really matters,” said Mike Rosen, chief investment officer at Angeles Investment Advisors, who has put money into Och-Ziff’s credit-opportunities fund. “I do want to invest in lucky people – that’s better than investing with unlucky people.”

As for whether Levin deserves such an exorbitant pay package, his peers appear to have embraced the logic that, if Dan Och thinks he’s worth it, then he probably is.

“The $280 million pay package is, of course, a vote of confidence. “You pay people for what they’ve done, but you also pay people for what you think they’re going to do,” Rosen said. It’s also an important sign to investors that Dan Och is willing to do what it takes to keep Levin on board, according to Odyssey’s Kahn.

Of course, Och Ziff wasn’t just paying Levin for his talents; they were paying for his loyalty, too. Levin knew his hand when he bargained for the $280 million pay day amid a rash of employee defections, including the loss of three senior executives in March.

By taking payment in the company's battered shares, Levin is making a gamble of his own. And thanks to his incentive pay, if he can help push the company’s share price closer to $7 over the next three years, he stands to receive a potentially massive bonus.

“The deal: Levin was granted 39 million shares tied to performance; he has to stay for three years and the stock has to return 125 percent, including dividends, for him to score the full payout. If the shares rise the minimum of 20 percent, he’ll make $50 million.”

Still it remains to be seen if there’s anything the firm can do to reclaim its reputation as an industry powerhouse following the scandal, which also saw Och pay a personal fine of $2.2 million. Furthermore, some of the firm’s investors have questioned whether Levin was the right pick, complaining about his lack of experience and depth.

Levin brushes off these criticisms, saying he prefers to focus on investing.

“It’s not worth spending time wallowing,” he said. “It’s definitely been a challenging time, but to move forward we’re just focused on what we can influence, and that’s our investing.”

Whether Levin is sufficiently qualified for a leadership role at one of the world’s largest hedge funds is something only time will tell. But at the very least, thanks to his massive stock grants, Levin’s financial interests are 110% aligned with the firm’s. Levin’s incentive-pay package looks attractive, but where will those shares be when they vest?

The company’s other shareholders are probably wondering the same thing.
 

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Authored by PIMCO Global Strategist Gene Frieda via Project Syndicate,

Bond investors are from Mars, and central bankers are from Venus – or so suggests the bond market’s negative reaction to signals that the exceptional monetary-policy accommodation of the last decade is winding down. Risky asset markets, however, are ignoring the red flags that the bond markets are waving. Are they right?

Today, inflation remains low in much of the developed world. But previously dovish central banks in countries like the United States and the United Kingdom are itching to roll back the accommodative monetary policies that they have pursued since the eruption of the global financial crisis of 2008.

Inflation-targeting central banks assume that, when inflation expectations are stable, changes in inflation stem from changes in the amount of slack in the economy. When slack diminishes – as is happening now, with unemployment now well below average levels over the business cycle (and at multi-decade lows in the US and the UK) – inflation will eventually rise.

Already, these central banks have maintained loose monetary policies for much longer than in the past, in order to offset the headwinds to growth and inflation that the financial crisis produced. Yet they know from past asset bubbles that leaving monetary policy too loose for too long risks digging an ever deeper hole, with natural interest rates and potential growth ending up even lower in the next cycle.

So are investors in risky asset markets right to be so complacent? For now, there can be no definitive answer. But the record from past periods of calm suggests that, when cross-asset market volatility is low, de-risking is prudent.

To be sure, investors would have greater cause for concern if there were clearer signs of excessive risk-taking in financial markets and the real economy – the kind of excess that craves the monetary-policy punch. Because periods of asset-price euphoria – exemplified by the dotcom and real-estate bubbles of 2000-2008 – typically feature exceptionally loose monetary policy, central banks are now trying to extend the business cycle by removing monetary accommodation in a gradual and predictable manner.

But asset-price bubbles also tend to feature new innovations that entice markets and central banks into believing that this time really is different. In the post-crisis context, the most likely justification for higher asset-price valuations is the global decline in the “price” of savings (the natural rate of interest), or R-star. If corporate earnings grow as a function of trend growth (the underlying rate of growth), but funding costs remain a function of an even lower R-star, then equity multiples should be higher than in the past on a structural basis, and credit spreads should generally be tighter.

But, while this argument appears accurate today, investors have at least two reasons to be worried.

First, to the extent that the gap between trend growth and natural rates drives up asset valuations, marginal changes in that gap should lead to changes in those valuations. If central banks were simply altering short-term interest rates – the traditional tool of monetary policy – as they have done in the past, this would be less of a concern.

But, in the present cycle, central banks have become far more dependent on indirect tools – namely, long-term interest rates. The effects of such tools are shaped by investor expectations, and are thus prone to sudden and extreme shifts. In 2013, for example, the US Federal Reserve’s suggestion that it would begin to taper off one of its quantitative easing programs triggered a “taper tantrum,” with money pouring out of the bond market and bond yields rising substantially.

The second key cause for concern is that higher valuations do not necessarily mean higher returns or better volatility-adjusted returns. Even if the positive gap between potential growth and natural interest rates justifies higher asset valuations, lower potential growth denotes lower returns across asset classes. As interest rates rise toward the natural rate, financial conditions should tighten, and risky asset valuations should fall. Central banks want this tightening to come about gradually, but the brief history of unconventional monetary policy suggests that asset re-pricing tends to occur abruptly – sometimes disruptively so.

Why, then, don’t investors take advantage of extremely low volatility to buy cheap insurance? Markets do not explode every time volatility is low, but volatility has always been extremely low when markets have exploded. Insurance is needed most when imbalances become extreme. Equity and credit valuations are not cheap; but they are not egregiously expensive, either.

Here on Earth, central bankers and bond investors have something in common: both worry that the current period of extremely low volatility is neither sustainable nor desirable. After all, lower combinations of fixed income, foreign exchange, and equity volatility have been seen three times before: just prior to the onset of the global financial crisis, in the month preceding the taper tantrum, and in the summer of 2014.

In short, there is no doubt that volatility will eventually rise to normal levels. For investors today, the lesson is clear: reducing the scale of risk exposure is the right way forward.

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Venezuelan President Nicolas Maduro has made it clear: Nothing short of the invasion threatened by President Donald Trump will stop him from holding a vote on a new constituent assembly that will officially replace the country’s legislature and likely allow the embattled president to rewrite the country’s Constitution, cementing his grip on power.

According to Bloomberg, Maduro has said the vote will be held next week in defiance of threats of US sanctions, and calls by his opponents for a two-day general strike. If approved, the new assembly will replace the country’s previous opposition-controlled assembly, which was annulled by the Maduro-controlled Supreme Court in March.

Once approved, it’s widely believed that Maduro will stock the assembly with political allies who will enable the re-drafting of the country’s constitution, allowing Maduro to consolidate power and officially marginalize anyone who opposes his regime.

President Nicolas Maduro

In the face of mounting violence, opposition lawmakers are urging citizens to demonstrate at polling places in a last-ditch attempt to foil the vote. The death toll from street demonstrations demanding Maduro’s exit that have become a daily occurrence  in Caracas and other Venezuelan cities since they started in April recently topped 100.

“Deputy Simon Calzadilla, speaking for Unidad Democratica, urged Venezuelans to go to their electoral centers Monday at 10 a.m. to place protest banners and signs that say ‘in my voting place there won’t be a constituent assembly.’

 

Calzadilla, in an email, also asked citizens to rally to Caracas next Friday to “demand massively” that Maduro’s government halt the assembly vote.

 

If the regime doesn’t cancel this fraud by Friday, the party will inform of the actions it will behold on July 29 and 30, Calzadilla said in the statement. “Center by center, street by street, neighborhood by neighborhood to defeat Maduro’s proposal.”

The US has threatened “strong and swift economic actions” against the regime, which could force Venezuela into a default if the US stops buying hundreds of thousands of barrels of oil a day from the country. The creation of the assembly will enrage millions of Venezuelans who are fighting against the entrenchment of the Maduro regime. Unsurprisingly, Maduro is struggling with abysmally low approval ratings. In a symbolic vote, 7.5 million Venezuelans who participated in an unsanctioned ballot overwhelmingly voted against the assembly.

In the run up to the vote, violence against Venezuela’s political opposition is intensifying. On July 5, Venezuela’s independence day, a mob of pro-government thugs brutalized a group of opposition lawmakers who were protesting Maduro’s plans to hold a vote on the new assembly. The irony of this exercise in repression was probably lost on the Maduro regime, which denied involvement and condemned the attack.

Opposition member Simon Calzadilla

Frustrated by the rising death toll, some protesters are banding together to form militias, abandoning the strategy of peaceful protest espoused by the opposition and diving headlong into violent urban guerilla warfare. One Bloomberg reporter followed a would-be militia group during one of its meetings, where members created Molotov cocktails and practiced assembling their weapons.

The protesters were explicit in expressing their distaste for the president.

“The security forces they’re up against, the riot-helmeted troops shooting tear-gas canisters and water cannon and bullets? “They all deserve to die,” one of the bomb makers said flatly, dripping petrol into a jar.

 

The call to arms coming from some in the resistance may be the initial stirrings of the kind of urban guerrilla movement the country hasn’t seen in half a century. It’s too early to tell if they’ll follow through on their threats, but the bold talk is a troubling sign for mainstream opposition leaders who have issued instructions – pleas, recently – for peaceful rallies and marches. Those calls increasingly fall on deaf ears. Masked activists hurl their homemade bombs, rocks, jars filled with feces, anything they can get their hands on. They’ve stormed office buildings, shattered store windows and blocked roads.”

“We are tired of being killed,” one demonstrator who refused to show his face or give his name told Bloomberg. “We are willing to go out with guns, to face them as equals,” he said. “The protest must evolve.” The demonstrator claimed to be a teenager from a middle-class neighborhood – fitting the profile of many of the young men who’ve died in the demonstrations.

Collapsing oil prices and years of economic mismanagement led to Venezuela's economic collapse beginning when the price of crude plunged in 2014. It seems that the vote, which the opposition has already written off as hopelessly rigged, will one way or another lead to the next evolution of Venezeula’s rolling political and fiscal crisis – be it a revolution or bankruptcy. The country is struggling with, dwindling foreign reserves, bond yields as high as 36%, and looming payments on billions of dollars of oil-company bonds that were bought by Russia. Meanwhile, its citizens are struggling with hyperinflationary hell that has rendered dollars 1000x more expensive than they were in 2010.  

As we reported yesterday, Helima Croft, global head of commodity strategy at RBC Capital Markets, believes the country’s next crisis point will arrive by Christmas. But with much of Venezuela resembling the lawless Detroit from the movie RoboCop – public mobs routinely lynch suspected thieves, and gangs of bikers waylay merchants carrying commodities to market – it’s difficult to imagine how the situation could get any more dire for the country’s desperate citizens. The only options left for them, it seems, are to forcefully demand regime change, or pray that the price of oil moves back toward $100 a barrell.
 

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

It appears that Horseman Global’s Russell Clark may have been spot on with his bearish take on the US shale sector.

As a reminder, in his latest letter to investors, Clark said that “the rising decline rates of major US shale basins, and the increasing incidents of frac hits (also a cause of rising decline rates) have convinced me that US shale producers are not only losing competitiveness against other oil drillers, but they will find it hard to make money.”

While the bearish thesis has yet to play out, moments ago Anadarko poured cold water on US energy investors after it missed earnings badly, reporting a Q2 EPS loss of 77c, more than double the 33 cent loss expected. However, what was far more concerning to shale bulls (and perhaps oil bears), is that the company admitted that it can no longer support its capital spending budget, and it would cut its 2017 capital budget by $300 million, becoming the first major U.S. oil producer to do so, as a result of depressed oil prices. In March, Anadarko had forecast total 2017 capex of $4.5 billion to $4.7 billion, a continuation of the recent CapEx rebound which troughed in Q3 2016.

Ahead of the Tuesday earnings call, APC CEO Al Walker confirmed Wall Street’s growing fears that oil prices are simply too low to sustain ongoing exploration when he said that “the current market conditions require lower capital intensity given the volatility of margins realized in this operating environment. As such, we are reducing our level of investments by $300 million for the full year.”

Ironically it was Walker himself who issued a clear warning to Wall Street in June, when he said that it was the relentless supply of cheap capital that was masking the underlying lack of profitability and allowing shale companies to pump beyond the point of negative returns: “The biggest problem our industry faces today is you guys,” Al Walker, chief executive of Anadarko Petroleum Corp. told investors at a conference last month, quoted by the WSJ.

Wall Street has become an enabler that pushes companies to grow production at any cost, while punishing those that try to live within their means, Mr. Walker said, adding: “It’s kind of like going to AA. You know, we need a partner. We really need the investment community to show discipline.”

Ultimately, it was up to Walker to demonstrate that discipline when he voluntarily reduced the amount of capital he would reinvest in his business. And since oil exploration is by far the most capital intensive industry, the hit to revenue will be quick and painful, much to the delight of OPEC which may finally be seeing light at the end of a long, dark tunnel. To that point, Anadarko also said it was trimming its 2017 production forecast to 644,000 bpd, a 2% cut.

Incidentally, Horseman is not the first to turn bearish on shale. As Bloomberg reported earlier, Goldman Sachs Asset Management has been shedding oil and gas-related company bonds in the past few months and shorting oil in some portfolios, according to Mike Swell, the firm’s co-head of global fixed-income portfolio management. The investment manager has moved from an overweight position in energy-related corporate bonds a few months ago to neutral today and toward an underweight stance, he said in an interview on Friday.

Some investors seem to agree with Goldman’s asset-management arm, at least enough to have a touch of skepticism about the prospect of these oil and gas explorers. Since the end of January, credit traders have demanded slightly more yield to own junk-rated bonds of oil and gas companies than other high-yield debt.

In an amusing twist, we reported last week that the very same Goldman reported last Friday that energy junk bonds are finally starting to notice the decline in oil prices:

Once the APC news reverberates across the industry, this may just be the straw that breaks the energy junk bond market’s back, as a scramble out of the sector ensues, resulting in the double whammy of also yanking much needed capital from shale companies.  Such an exodus could not come at a worse possible time: as Bloomberg calculated if oil prices were to stay below $47 a barrel, “investors will demand a bigger cushion of extra yield to own junk-rated energy debt. Part of the reasoning is that these firms still require an excessive amount of leverage (and investor faith) to keep operating as junk-rated oil and natural gas producers have more than $25 billion of credit-line commitments expiring in 2019. If oil prices don’t rebound, banks have good reason to reduce those lines substantially, siphoning off a crucial funding source.”

Think a rerun of the late 2015/early 2016 period all over again.

However, while the Anadarko news is clearly negative for its shale peers, most of whom are set to announce similar capex declines, it will likely end up being positive for oil prices as much of the “swing” crude production courtesy of the US shale basin is about to be reduced substantially, in a clear victory for OPEC which has been waiting long for just this day.

Anadarko’s CapEx cut also comes in the same month as the EIA announced that US shale production just hit a new all time high of 5.472mmb/d.

To the disappointment of many energy bulls (and oil bears as a reduction in production means that the shale supply glut is about to get far smaller), it may be all downhill from here.

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Authored by Mike Krieger via Liberty Blitzkrieg blog,

A lot of people remain in denial about the current political environment. Whether it’s a neocon Never Trumper, or a manic Hillary dead-ender, what these people all have in common is they firmly and passionately think their world is somehow coming back. They still don’t understand that the party’s over.

In our foolish apathy, we entrusted the country to these “very smart people” and they handed the entire thing over to crooked oligarchs, while simultaneously cheerleading us into a never-ending stream of reckless, inhumane imperial wars. They hollowed out and feasted on the entire nation and now, incredibly enough, have rebranded themselves as leaders of a toothless resistance to the mess they created. Delusional doesn’t even begin to describe these people. They genuinely think Trump’s rise represents some bizarre historical blip, and once the hideous blemish is removed, things can carry on as they were. That’s not going to happen.

Before I get into the thick of it, I want to revisit something I wrote a couple of weeks ago in the post, The Center Cannot Hold – Decentralize or Die:

In order to understand the long-term implications of these emails on the future of the nation, you need a good understanding of the primary warring factions in American politics today. We have Donald Trump supporters/voters, Hillary Clinton supporters/voters, and a resurgent left inspired and energized by the principles and ideals espoused by Bernie Sanders. The first two have absolutely zero overlap and pretty much hate each other, while the third group can sometimes identify with either camp depending on the issue, but pretty much think they’re both crazy and dangerous. The key point I’m trying to make is that there is no “center” in American politics anymore, and any discussion of this is pure fantasy. Moreover, any remaining center that still exists, is unlikely to exist at all in a year or so as more and more people feel forced to choose sides. When you create an environment as charged as this one where everyone is accusing their political opponents of treason, this is what you get; and it’s only going to get worse. A lot worse…

 

If what I wrote above rings true to you on any level, it has dire implications for the future of these United States. The first two groups, Trump supporters and Hillary supporters have absolutely nothing in common and that’s not going to change. In fact, it’s probably going to get much, much worse. Trump supporters think the Democrats and the media have been gunning for a way to remove him from office since the day he was elected, while Hillary supporters think he’s a treasonous puppet of Vladimir Putin. How can these two warring factions come to any sort of agreement on anything? The answer is, they can’t and they won’t. Meanwhile, Bernie supporters are likely to largely stay on the sidelines hoping these two sides destroy each other in their madness.

In a gross oversimplification, the above implies that the political environment going forward will be defined by a vicious battle between the Trump faction and the Hillary faction. While I think this will probably be true for much of the rest of 2017, there’s a good chance that a year from now, the union of Hillary donors, Never Trump neocons and the corporate media will find themselves increasingly irrelevant, on their way to being wiped off the political landscape forever. In its place, a more genuine opposition political movement will take form and face off against Trump on real issues.

This movement was first really seen on the national level with the candidacy of Bernie Sanders, but it takes on many different forms. The one aspect I want to discuss today due to its growing influence and potential for explosive growth, is a faction that has become known as the “Dirtbag Left.”

To get a sense of what I’m talking about, you should read an article published earlier this month at Maclean’s titled, The Rise of the Internet’s ‘Dirtbag Left.’ Here are a few excerpts:

Nagle sees the rise of the violent, hateful, and often deliberately confounding culture of the alt-right tied up inextricably with failures of the left. Where the internet was once viewed as a utopian space for free expression, and experimentation with thought and identity, it eventually became colonized by a calcified leftist sameness, thanks to sites like Tumblr and Twitter, where buzzwords and ideologies multiply and spread like viruses. There was also a certain sanctimonious and self-righteous tone that came to dominate these conversations. Certain strains of leftism—and especially those that valued identity above all other social and political categories—began to monopolize the free market of ideas, making the experience of being online if not entirely oppressive in its patrolling of ideas and verbiage, then certainly much less fun.

 

Many who were alienated by this culture drove deeper underground, to sites like 4chan and Reddit, where new mutations of far-right, anti-feminist, racist, Islamophobic, white supremacist ideologies—with their focus on memes, jokes, trolling and pushing back against political correctness—restored, for them, the earlier anarchic promise of the Internet. As Nagle writes, the emerging alt-right “had little in the way of a coherent commitment to conservative thought or politics, but shared an anti-PC impulse and a common aesthetic sensibility.”

 

The culture of call-outs and one-upping “wokeness”—a condescending term used to describe an overstated performance of political correctness—was diagnosed as far back as 2013 by British blogger and political theorist Mark Fisher. In his essay “Exiting the Vampire’s Castle,” Fisher decried the “stench of bad conscience and witch-hunting moralism” that emanated from the online social-justice set. He also identified the collective paralysis among those on the left who disagreed with those tactics, a “fear that they will be the next one to be outed, exposed, condemned.” Fisher, predictably, became a target of such condemnation after his essay was published; many ghouls returned to mock him when he committed suicide earlier this year.

 

“Anyone on the left with any independence of mind has experienced this backlash,” says Nagle. “People will look back at this period as a moment of madness—if it ends. I feel like there’s much more of an exciting, funnier left-wing culture emerging around people who are critics of it. That’s not a coincidence. You can’t be a puritanical purger and have a sense of humor.

 

Enter a new culture of the online left. It’s a reinvigorated wing that’s simultaneously anti-alt-right, anti-PC and anti-SJW, anti-centrist and against liberal-democratic line-toeing. It’s a movement that uses many of the tactics of the online alt-right—humour, memes, Twitter trolling and open animosity—while remaining committed to progressive leftist ideology. It’s sometimes called the “alt-left” or the “vulgar left,” or the “Dirtbag Left”—a term coined by Brooklyn based writer, podcaster, and activist Amber A’Lee Frost.

 

Frost is a co-host of the popular politics podcast Chapo Trap House. Founded by politically savvy Twitter jokers Will Menaker, Felix Biederman and Matt Christman, Chapo Trap House gained massive traction during the 2016 U.S. presidential primaries among online factions of “Weird Twitter” and “Left Twitter” who were eager to push back against the ascendency of war-hawk Democratic candidate Hillary Clinton and stem the tides of #ImWithHer memes. “Twitter was poised to examine the primaries in a way that the established media either would not or could not,” Frost writes in an e-mail. “This was a great moment in terms of consciousness-raising and communication.”

From my seat, there are three really important aspects of the “Dirtbag Left” that makes it a very potent political phenomenon.

First, it doesn’t hold back or pay tribute to the PC speech-policing cultists. People across the political spectrum are sick and tired of people pushing this idea that “language is violence” in order to censor not just political speech, but also comedy. In fact, what attracted many people to the “alt-right” or “alt-light” was simple rebellion against the increased stupidity of political correctness even if they didn’t have much in common with the political positions of Trump. The dirtbag left is quickly taking that advantage away.

 

The second is humor. When was the last time Alex Jones made you genuinely laugh with clever wit as he delivered a political point? Political ideas are powerful, but political ideas coupled with humor are virtually unstoppable.

 

Third, this faction of leftism is waging war against Clinton neoliberal frauds and Trump’s fake populism at the exact same time. Not an easy thing to do, but I think there’s a huge and growing unsatisfied demand for such a perspective.

A lot of you will discount the appeal of this movement because many of its most high-profile members are unabashed socialists. This is a big mistake. Remember, Donald Trump won the Presidency not because he was especially great or loved, but because his opponent was terrible, he talked in populist terms, and people just wanted to give a middle finger to the political establishment and corporate media. If that’s right, what’s to stop a movement from winning power if it promises to flip the bird to both Trump and Clinton while also making you laugh? Not much.

I think the “DirtBag Left” will catch the Trump team completely off guard over the next few years. The reason Trump’s prospects look pretty good right now for a second term is because there’s no real organized opposition to him. By real organized opposition, I mean a movement driven by actual ideas and passion that is also working on a plan to run a competitive candidate in 2020. The current “resistance” consists of Hillary donors, neocons, the corporate media and elements of the deep state. While Trump complains about this opposition constantly, he doesn’t realize how good he has it. The American public hates those factions more than they hate Trump, and nobody wants to vote for that discredited garbage in 2020.

The best possible thing for Trump in 2020 would be another opponent with no ideas who focuses on stupid slogans ad identity politics. He’d love to once against face off against an empty suit (pantsuit?) who enthusiastically serves as a poodle for billionaire financiers and an assortment of other oligarchs. Trump can be a fake populist his entire first term and still win that race. What presents him a much bigger challenge would be a genuine populist challenger backed by a dynamic, grassroots movement. This is where the “DirtBag Left” comes into play.

This faction isn’t trying to compromise with hopeless #ImStillWithHer clowns. Like myself, 40% of the country is independent and this demographic remains up for grabs in a national election. This is the target audience. People who see that the country continues to circle the toilet bowl, and understand that Trump is a total phony. The best thing Trump has going for him is the media is seen as his primary adversary. As long as he can continue to frame the debate as him vs. the corporate media, he wins. Confronting a competing populist message that wants to deal with oligarchy will be much harder for him, and would in fact push him toward actual populist polices if he wants to win reelection. Just like being against Trump was’t enough for Hillary, being against the media won’t be enough for Trump either, IF a competing message that resonates emerges.

In order to understand the next political wave that will sweep across America, you need to understand the dirtbag left; and if you want to understand the dirtbag left, you need to get to know Chapo Trap House. Below is a clip discussing Hillary’s loss shortly after the election.

If you think politics is crazy now, you ain’t seen nothing yet. Tomorrow I’ll discuss how Democrats can either become economic populists, or die as a political party.

via http://ift.tt/2uuf6Tf Tyler Durden

In April we noted that Swedish company Epicenter had begun implanting RFID chips into workers hands… and the workers loved it… it makes opening doors and buying smoothies so easy and convenient, and your coworkers will even throw a party for you once you take the plunge to become a cyborg.

The injections have become so popular that workers at Epicenter hold parties for those willing to get implanted.

 

“The biggest benefit I think is convenience,” said Patrick Mesterton, co-founder and CEO of Epicenter. As a demonstration, he unlocks a door by merely waving near it. “It basically replaces a lot of things you have, other communication devices, whether it be credit cards or keys.”

Workers there seem alright with the idea. In the article, the general attitude is perhaps best captured by the comment of one 25-year-old worker:

“I want to be part of the future.”

And now, as ABC5 reports, a Wisconsin company is about to become the first in the U.S. to offer microchip implants to its employees.

"It's the next thing that's inevitably going to happen, and we want to be a part of it," Three Square Market Chief Executive Officer Todd Westby said.

More than 50 Three Square Market employees are having the devices implanted starting next week. Each chip is about the size of a single grain of rice.

The company designs software for break room markets that are commonly found in office complexes. Just as people are able to purchase items at the market using phones, Westby wants to do the sam thing using a microchip implanted inside a person's hand.

"We'll come up, scan the item," he explained, while showing how the process will work at an actual break room market kiosk. "We'll hit pay with a credit card, and it's asking to swipe my proximity payment now. I'll hold my hand up, just like my cell phone, and it'll pay for my product."

Westby added the data is both encrypted and secure.

"There's no GPS tracking at all," he said.

Westby described the microchipping as the “next evolution” in payment systems and suggested the technology could one day replace the passport.

“We foresee the use of RFID technology to drive everything from making purchases in our office break room market, opening doors, use of copy machines, logging into our office computers, unlocking phones, sharing business cards, [and] storing medical/health information."

Of course, this is being spun as a benefit to everyone – think of the convenience – but as Michael Snyder concluded previously, if widespread microchipping of the population does start happening, at first it will likely be purely voluntary.  But once enough of the population starts adopting the idea, it will be really easy for the government to make it mandatory.

Just imagine a world where physical cash was a thing of the past and you could not buy, sell, get a job or open a bank account without your government-issued microchip identification.

Will you allow yourself and your family to be chipped when that day arrives?

If not, how will you eat?

How will you survive?

What will you do when your children come crying to you for food?

I am certainly not saying that you should allow yourself to be chipped.  I know that nobody is ever chipping me.  But what I am saying is that people are going to be faced with some absolutely heart-breaking choices.

via http://ift.tt/2v1cIGH Tyler Durden

You know it's bad when even the traditional 'pumpers' are getting anxious. While obviously counched in its own "well maybe that's not totally terrible" spin, reading the following from Charles Schwab suggests Liz Ann Sonders, Brad Sorensen, and Jeffrey Kleintop were all struggling to defend any bullish position and perhaps more desperate to CYA in case reality doesn't match their hard-sold perception…

Via Schwab.com,

How long?

Are risks growing or will the bull market continue? We believe the answer to both is yes. Political bumbling, monetary policy shifts, and geopolitical tensions have all escalated, but the bull continues to power ahead, largely unscathed by the tumult that surrounds it. This is actually in keeping with history, as partisan conflict in particular has served as a contrarian indicator for stocks in the past. Since past performance is not an indication of future results, consider it yet another brick in the wall of worry. However, it's uncertainty around monetary policy that would likely be a culprit behind any coming choppiness in stocks.

The aforementioned uncertainties have kept investor sentiment from becoming too frothy, which helps to support the ongoing bull market. We don't see signs yet of a "melt-up" scenario, where investors frantically rush into stocks, afraid they’re missing out on gains. As good as melt-ups feel while they’re underway, they don't end well.

The possibility of a correction (defined as a greater than 10% pullback) is greater now than it was at the beginning of the year; especially given the uncharted territory in which the Federal Reserve finds itself, as it soon begins to unwind its $4.5 trillion balance sheet. We are modestly concerned about asset valuations that have soared in the era of artificially low interest rates and a bloated balance sheet.

We don't think the bull is ready to take a bow just yet, and at this point would view pullbacks as healthy. According to Strategas Research it has been 268 trading days since the last 5% pullback—the fourth longest streak since 1950 (the 1990s had two of them).

Earnings growth is the mother's milk of sustainable stock market gains and the next few weeks will go a long way to determine the status of corporate health. With one quarter down and another one in the process of being reported, it looks good, with the Thomson Reuters-reported consensus expecting at least a 10% year-over-year increase in earnings for 2017. What is more impressive is that the year's expectations have only been downgraded slightly from the 14% growth rate projected at the beginning of the year. To illustrate how solid that is, look back to 2016, when projections at the beginning of the year were for 13% annual growth in earnings. Those projections were steadily downgraded throughout the year before ending up with an actual growth rate last year of less than 2%. 

Of course, a high expectations bar leaves open the possibility of disappointments, which could add to volatility in the coming weeks. Already we've seen major banks largely beat estimates but pull back on some concerns about some seasonally soft numbers—which arguably should have been built into expectations. And the energy sector's contribution to forward-looking expectations is already past its peak.

Economic data continues to confound

Another support for stocks may be coming from economic data that is showing a robust labor market, but few signs of inflation building.  The unemployment rate is 4.4%, yet wage gains remain modest. The Consumer Price Index (CPI) was flat month-over-month, while ex-food and energy it only ticked 0.1% higher.

More concerning is the lack of solid increases in retail sales, although we believe the measuring process may be somewhat flawed due to the changing mix of sales. Nonetheless, it isn't particularly encouraging for an acceleration of economic growth when retail sales as reported by the Census Bureau were down 0.2%, and ex-autos and gas sales ticked 0.1% lower.

On the plus side, the latest industrial production reading provided by the Fed bested estimates by showing a 0.4% gain, while capacity utilization moved higher to 76.8%; heading in the right direction but still 3.3 percentage points below the long-term average. Also, after a sharp decline, the U.S. Citi Economic Surprise Index has started to turn around, which should be another support for the ongoing bull market in stocks.

Fed seems confused, while politicians are befuddled

Economic uncertainty has confounded the Fed, which may raise the risk of a policy mistake and/or bouts of market volatility. In her testimony before Congress last week, Chairwoman Yellen indicated that the Fed is somewhat confounded by lower-than-expected inflation; citing "temporary" (and transitory) factors. She voiced no concern about elevated asset valuations, arguably brought on to some degree by the Fed's unprecedented monetary policy since the financial crisis.  This put the potential for another rate hike this year into greater doubt. We're sticking with our forecast for one more hike this year along with the start of a gradual reduction in their balance sheet in their effort to "normalize" monetary policy; but also believe the latter could come before the former. However, Yellen also bolstered the doves' case by noting that it is becoming more apparent that the "normal" level of interest rates may be below what it had been historically.

Down the street…what can be said? Politicians continue to play politics. Behind the headlines some business friendly policies have begun to have some positive impact, such as a reduction in the regulatory burden. But the three biggies—health care reform, tax reform and infrastructure spending—all appear mired in the morass that is Washington. Business leaders are used to this sort of muck in Washington and have made few plans based on potential changes. But there is little doubt in our mind that if nothing gets done, there will be disappointment among businesses and investors alike, which could add another log to the pullback fire. Already we are seeing the subjective "soft" data (survey- and confidence-based) catch down to the weaker objective "hard" data, as we expected.

…

So what?

A solid earnings season should contribute to a continuation of the bull market in stocks. Dangers are lurking, however, and the possibility of a decent-sized pullback has grown over the past couple of months, in light of monetary policy and geopolitical uncertainties. While we would likely view such a move as healthy, it can be disconcerting. Stay diversified and be prepared to guard against overreacting to any such move.

via http://ift.tt/2gXZl47 Tyler Durden

Google, aka Alphabet, reported Q2 earnings that beat on the top and bottom line, reporting EPS of $5.01, above the estimate of $4.45, and earnings per share excluding the $2.7 billion European Commission fine of $8.90, also above the $8.25 expected. Total Q2 revenue of $26.01 billion rose 21% Y/Y, and also beat consensus of $25.64BN.

Yet while Google’s top and bottom line results were both impressive, the reason why the stock was down as much as 3.6% in the after hours appears to be that Google reported paid clicks in Q2 rose by 52%, well above expectations, while cost-per-click – which measures what advertisers pay when people click on search ads that show up alongside the results served up by Google’s search engine – declined 23%, a  drop from the -19% CPC reported in Q1 and down even more from the -15% in Q4 2015.

In other words, more people are clicking on ads, but those clicks are costing advertisers less money per click, and generating less sales for GOOGL. In short, a potential revenue mix concern where Google is compensating for lower pricing power (due to the encroachment of Facebook?) with higher ad volumes.

One thing is certain: the CPC trend is certainly not Alphabet’s friend:

Additionally, Q2 Revenue ex-Traffic Acquisition Costs was $20.92 Billion, modestly below the $21.07 billion consensus estimate.

Some other details:

• 2Q Other Bets revenue $248 million
• 2Q Other Bets operating loss $772 million
• 2Q Google advertising revenue $22.67 billion
• 2Q free cash flow +$4.57 billion

While the stock initially responded favorably, surging to new all time highs above $1000, the latest print was down 2.5% as the market digests the potentially disappointing revenue mix data.

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