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The record-breaking streaks of un-dipping gains; the "epic" bull market (Morgan Stanley's words, not ours); and the total and utter collapse of all risk premia (equity and credit alike) is all about to end according to former fund manager Richard Breslow: "as the long running debate about lack of volatility in the markets continues, I’ve got some good news for you. As long as you promise to be happy with what you wish for. It’s about to change."

Investors are fearless…

And reaching for yield, no matter what…

Even as real uncertainty soars…

Sure we have momentary bouts of hysteria which people get all excited about and extrapolate to eternity – until they run out of steam forthwith, but as Bloomberg's Richard Breslow writes:

"I’m talking about good old fashioned two-way flow and nascent trends galore. And I’m officially declaring today the very start of the entire change over process.

 

Wouldn’t it be ironic if future generations of traders celebrate this epiphanic moment of a return to volatile markets by shutting the exchanges and sleeping in?"

Via Bloomberg,

So what’s the big news? I’m glad to say it isn’t war or some other catastrophe. Those have become anti-volatility events, for better or worse. The big news is the release of the FOMC minutes. Now before you get excited, or derisive, I don’t expect any profound surprises. I’m not even all that consumed by the inevitable wrangling over why inflation isn’t showing up in the measurements they’ve chosen. It’s that this is the true start down the road to tapering. Which I expect to start very tamely, orderly and with many pats on backs.

 

So what’s the catalyst? It’s the next phase of the free rider problem.

 

 

QE worked because those benefiting from the appropriation of the public good, namely central bank balance sheets, were the ones in charge. In every sense of the word. And if you were a member of the class of citizens that got left behind you were assured that it was your patriotic duty to accept it gratefully. And by the way, what are you going to do about it?

 

This was only sustainable and achievable because everyone in the developed world hegemony was doing it in tandem. My low rates are your low rates. As are my equity prices and suppressed volatility. Now that was true globalization. But this is going to change.

 

The Fed is confident their tapering plan can work because they comfortably assume that the other central banks will let the U.S. enjoy free ridership from their ongoing asset purchases and ridiculous rate structures. That surmise may seem reasonable at the outset, especially with the initial numbers so small. And ultimately prove to be just a bridge too far. And it doesn’t have to be so out of any jealousy, malice or the kind of pettiness that causes all those occasional outbreaks of currency wars.

 

The issue for the other countries will be that once the U.S. has begun to meaningfully get their balance sheet in order and follow some version of the medium-term dot plot, there will be no protection from global rates being forced collectively higher. And equity markets will realize what’s coming. Sheer survival instinct will force the ECB, BOJ, and others to move forward their own normalization plans.

 

From the lowest of levels. They’ll have no choice or risk be left high and dry, with very few options of their own. And investors, too, aren’t prepared for it.

 

It is simply asking too much for the Fed to expect everyone else to smooth their transition, eliminate any pain, make them the heroes and then announce, like a scene from Blazing Saddles, “Son, you’re on your own.” No one is isolated or isolatable and friendship only goes so far.

 

Those wily foreign exchange traders are the first ones to get this.

 

 

Probably because they benefited the least from the actions of the last decade. It makes perfect sense to like the dollar given the divergent central bank cycles out there, but they can’t help understanding that there will be plenty of room for other sovereign rates to snap higher at some point and that is when two-way price action becomes intense.

 

It is this free ridership problem that should frame the debate over a hawk or dove becoming the next Fed Chair, not whether we should expect an extra hike somewhere down the line.

The timing for this 'changeover' process seems frighteningly prescient…

via http://ift.tt/2i1xxwl Tyler Durden

As nearly all of Hollywood mega producer Harvey Weinstein’s old associates wash their hands of the disgraced Hollywood mega producer, his fashion designer wife Georgina Chapman has revealed that she is separating from her husband as he “seeks treatment” for his horrible condition, the New York Post reports.

Chapman expressed disgust at her husband’s actions and said her “heart breaks” for all the women who have shared their stories of assault and harassment with the New Yorker and New York Times.

“My heart breaks for all the women who have suffered tremendous pain because of these unforgivable actions,” fashion designer Georgina Chapman told People magazine on Tuesday.

“I have chosen to leave my husband. Caring for my young children is my first priority and I ask the media for privacy at this time.”

In a statement, Weinstein said he supports her decision and that “perhaps, when I am better, we can rebuild.”

“Over the last week, there has been a lot of pain for my family that I take responsibility for,” he said.

“I sat down with my wife Georgina, who I love more than anything, and we discussed what was best for our family. We discussed the possibility of a separation and I encouraged her to do what was in her heart.”

“I understand, I love her and I love our children and hopefully, when I am better, I will be in their lives again,” he added.

Business Insider reported earlier in the week that the allegations against Weinstein could harm the business of Georgina Chapman, a fashion designer, who is now in a difficult position as it appears nobody in Hollywood will want to wear labels that carry such a close affiliation to Weinstein.  

Chapman's career as the cofounder of Marchesa is tightly tied to her husband's success. Stars of Weinstein-backed productions, including Renée Zellweger, Cate Blanchett, and Blake Lively, have worn Marchesa on the red carpet, and rumors have floated for years that Weinstein pushed actresses to wear the fashion brand.

But with an increasing number of allegations of sexual harassment and assault against Weinstein, many are wondering whether Marchesa will disappear from the red carpet.

"No star is ever going to want to wear the brand again," The Hollywood Reporter quoted an unnamed New York fashion publicist as saying on Monday, after Weinstein was ousted from The Weinstein Company, the studio he founded.

Initially, Chapman, 41, had said she would stand by her husband. But as the aftermath of the scandal has been more intense than either of them probably anticipated, she has now decided it would be prudent to join the rest of the world in backing away from her now-toxic husband.

As the latest round of allegations against Weinstein emerged in separate reports in the New Yorker and New York Times on Tuesday, Hillary Clinton finally issued a statement condemning the actions of Weinstein, a major donor to her campaign.

Who will be the next person to publicly renounce the former mogul?  

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

Is it complacency, or simply trader paralysis?

A question we first asked three months ago is getting a second wind this morning, when in a report by Deutsche Bank’s Alan Ruskin – “Vol: freeze or flight?” – the macro strategist points out that “the new 2017 Nobel laureate for Economics is not the only one at a loss to explain low stock market volatility, and thinks investors are in ‘freeze mode’ in the midst of global uncertainties.”

According to Ruskin, however, it’s all about to change.

But why? And what is “the most likely causes of a shift to ‘flight mode’ and a rise in volatility? Here’s one possibility: by the end of next year, the combined expansion of all the major Central Bank balance sheets will have collapsed from a 12 month growth rate of $2 trillion per annum to zero.”

But before we get to the inevitable next step, here’s Deutsche Bank on how we got to the current state of paralytic complacency, or whatever one wants to call it.

To be sure, the wire headlines were catchy: “Nobel prize winner Thaler admits to not understanding the low volatility in the stock market.” The behavioural economist went on to note that investors appeared to be in “freeze” rather than “flight mode”. There are, according to Ruskin, at least three broad explanations for the current low volatility world, and why investor “freeze” appears to be favoured over “flight”, including:

1. On the behavioural economics side there is the suggestion that many equity investors have entered at good levels and are capable of withstanding fairly sizable negative shocks; and, investors can’t trade or at least time, hypothetical apocalyptic events like a N.Korea accident;
2. On the real economy side – the global recovery may be slow but it is remarkably steady. In the last five years, the IMF’s world growth estimate has varied between a low of 3.02% in 2012 and a high of 3.17% in 2016! The global growth rate is itself just about frozen. Similarly, inflation is not just a story of trend disinflation, but of inflation inertia, evident in inflation neither rising as much as expected in the recovery; or, less remarked, falling as much in the Great Recession
3. And then there is policy. Central Banks have contributed to low volatility through at least three avenues: a) at its most extreme the BOJ have literally frozen JGB yields, while other Central Banks have been intent on keeping bond yields low; b) the ‘stock effect’ of QE, means that there is strong legacy influence of past unorthodox easing which stabilises the bond market even as Central Banks shift to tighten; c) the post 2008 asymmetric policy approach, to ease when risk is vulnerable, but not remove emergency accommodation on asset market ebullience, represented the globalisation of ‘the Greenspan put’.

Indeed’ as shown previously, it’s not just equities.

Of the above factors, the forces that have contributed to subdued bond market volatility are likely to be drivers of low volatility in all other asset classes, most obviously equities. Meanwhile, currencies have tended to show slightly greater vol than bonds or equities would suggest, which is probably because they are the best vehicle to express some idiosyncratic political stories, not least related to the rise of populism/nationalism.

Still, with the VIX once again knocking on eight’s door, Ruskin believes that vol is “near its lower limit” and lists the following four reasons why:

1. Can the real growth and inflation trends remain any more compliant? After all US and global measures are both in the perfect “not too hot not too cold zone”. We may have already past the point where inflation is at its most vol depressant, and US inflation is seen being more supportive of vol in H2 next year;
2. Central banks, if anything, are likely to be wary of lower vol, that was seen as a potential catalyst for excessive risk taking before the 2008 crisis. Similarly Central Banks will avail themselves of the lower volatility that is associated with strong risky asset performance and easier financial conditions by continuing the process of policy normalization that will support vol. Yes normalization will be done at a “gradual” pace that precludes persistent disruptive spikes in vol, but only as long inflation remains reasonably quiescent.
3. We only have only limited experience with the ‘stock versus flow’ effects of QE. 2018 will see the world’s most important Central Bank balance sheets shift from a 12 month expansion of more than $2 trillion, to a broadly flat position by the end of 2018, assuming the Fed and ECB act according to expectations. The QT that was feared surrounding the taper-tantrum never happened in 2014/15, but will very likely occur in 2018/19.
4. Will the Fed’s balance sheet exit work as smoothly as the econometric work equating the Fed’s 2018 balance sheet reduction to a 15bpincrease in the 10y yield? Coefficients tend to change over time, not least if there are other forces pushing in the same direction, leading to a compounding effect. Higher inflation and/or other Central Bank QE tapering from the likes of the ECB could compound the expected small negative bond influence from the Fed balance sheet adjustment.

To be sure, we have heard it all before, most recently in June, when Citi’s Matt King showed the exact same chart of collapsing central bank flow, and warned that a “significant unbalancing is coming”

For those who missed it, here are some of King’s notable comments:

Next year looks very different. We project that the private sector will have to absorb c.$1tn of securities – the highest number since 2012. The main driver for this is our anticipated reduction in ECB purchases from €780bn this year to €150bn in 2018. The faster pace of Fed balance sheet reduction we can now expect cements our impression that next year will see a big shift away from the current status quo. Assuming that Fed balance sheet reduction begins in September, the US market will have to absorb a further $450bn of supply in addition to the gap left by the ECB

The Citi strategist was not optimistic on risk assets once the balance sheet unwind begins, noting that “given how tight spreads are to fundamentals and, even more importantly, the ultimate trajectory of central bank support, we remain confident that the next major move for credit will be towards wider spreads.“

King then concluded by looking at the upcoming collapse in central bank security injections that “the likelihood that in markets a significant un-balancing (or perhaps that should be re-balancing?) is coming.“

Ruskin’s conclusion is identical:

“As we look at what could shake the panoply of low vol forces, it is the thaw in Central Bank policy as they retreat from emergency measures that is potentially most intriguing/worrying. We are likely to be nearing a low point for major market bond and equity vol, and if the catalyst is policy it will likely come from positive volatility QE ‘flow effect’ being more powerful than the vol depressant ‘stock effect’. To twist a phrase from another well know Chicago economist: Vol may not always and everywhere be a monetary phenomena – but this is the first place to look for economic catalysts over the coming year.”

Assuming that Ruskin – and King – are correct, the consequences for risk assets, once the market grasps the implications, will be dire, however the outcome is far from certain: after all we have been at this pre-taper junction before, and every time the market threatened even a modest correction some Fed talking head comes out and hints at QEx and easier financial conditions.

Will this time be any different? The answer, according to the market for the time being at least, is a resounding no.

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

In what appears to be a desperate, early-morning marketing push to avoid the embarrassment of his tax reform package meeting the same fate as his Obamacare repeal effort, Trump released the following tweet storm touting the “unprecedented $5.2 trillion” in stock market gains since his election and promised those gains would “grow by leaps and bounds” if “Congress gives us the massive tax cuts (and reform) I am asking for.”

“Stock Market has increased by 5.2 Trillion dollars since the election on November 8th, a 25% increase. Lowest unemployment in 16 years and if Congress gives us the massive tax cuts (and reform) I am asking for, those numbers will grow by leaps and bounds.”

 

“It would be really nice if the Fake News Media would report the virtually unprecedented Stock Market growth since the election.Need tax cuts”

Stock Market has increased by 5.2 Trillion dollars since the election on November 8th, a 25% increase. Lowest unemployment in 16 years and..

— Donald J. Trump (@realDonaldTrump) October 11, 2017

…if Congress gives us the massive tax cuts (and reform) I am asking for, those numbers will grow by leaps and bounds. #MAGA

— Donald J. Trump (@realDonaldTrump) October 11, 2017

It would be really nice if the Fake News Media would report the virtually unprecedented Stock Market growth since the election.Need tax cuts

— Donald J. Trump (@realDonaldTrump) October 11, 2017

Of course, with a narrow lead in the Senate, Rand Paul’s rejection, Steve Bannon’s “war on the GOP establishment” and a nasty feud brewing with Senator Corker, the market is seemingly starting to question whether tax reform is possible.

And while Trump has hinted at potentially working with Democrats on tax reform, the following tweet could suggest that is now off the table.

The Democrats want MASSIVE tax increases & soft, crime producing borders.The Republicans want the biggest tax cut in history & the WALL!

— Donald J. Trump (@realDonaldTrump) October 11, 2017

Finally, just for good measure, the President also took a victory lap in his feud with the NFL by thanking Roger Goodell for caving and asking his players to stand for the National Anthem.

It is about time that Roger Goodell of the NFL is finally demanding that all players STAND for our great National Anthem-RESPECT OUR COUNTRY

— Donald J. Trump (@realDonaldTrump) October 11, 2017

So, what say you?  Is tax reform already dead or can Trump pull a rabbit out of the hat?  No matter the outcome, we know one thing for certain…it will be positive for stocks.

via http://ift.tt/2wN0w9P Tyler Durden

Authored by Charles Hugh Smith via OfTwoMinds blog,

The quality, durability, utility and enjoyment-of-use of our products and services has been plummeting for years.

One of the more mysterious aspects of the official inflation rate is the hedonic quality adjustments that the Bureau of Labor Statistics makes to the components of the Consumer Price Index (CPI).

The basic idea is that when innovations improve the utility (and pleasure derived from) a product, the price is adjusted to reflect this improvement.

So if television screens become larger, while the price per TV remains the same, the hedonic quality adjustment adjusts the price down when calculating the CPI.

In other words, since we're getting more for our money–more quality, more features, more goodies, more pleasure–the price is adjusted down to reflect this. If a TV that cost $250 had a 19-inch screen in the old days, and now a $250 TV has a 27-inch screen, the price of TVs in the CPI is adjusted down to reflect this increase in what the consumer is getting for her $250.

So while a TV still costs $250 to the consumer, in terms of measuring inflation the TV is reckoned to cost (for example) $225, as the consumer is getting a larger screen for her $250.

In other words, the price of TVs declines when measuring for inflation, even if the retail price remains unchanged. This is how the official rate of inflation can be so low even as real-world costs keep rising.

If you read the above link, you'll find the mathematical model used to reduce the price of products when calculating the CPI, i.e. the rate of inflation.

While the BLS website makes mention of the possibility that hedonic quality adjustments occasionally go the other way, i.e. quality has declined, it's clear this almost never happens. "Innovations" are always improvements.

I propose we start tracking anhedonic quality adjustments, i.e. significant declines in quality, durability, utility and the pleasure derived from the product or service. (Anhedonia: inability to experience pleasure from activities usually found enjoyable.)

First up: airline travel. Can any remotely objective passenger claim that airline travel is now more pleasurable than it was in the past, and that the quality of the product and service has increased due to "innovations"?

We all know virtually every aspect of air travel has declined other than the reliability of the aircraft–and due to tight schedules, just-in-time inventorying of spare parts and lack of redundancy (i.e. spare aircraft), even minor maintenance issues now routinely trigger flight delays.

Have typical airline seats become larger and more comfortable? You're joking, right? Seats have been shrinking even as the average girth of the passengers has increased.

First class seats may have become more luxe, but so have the fares.

As for hedonic experiences such as pillows, blankets, meals–welcome to Anhedonia. The industry is shifting to an everything now costs extra model: printing a boarding pass, speaking with a sales rep on the phone, carry-on luggage, etc.–everything carries an additional fee.

Changing a flight reservation can cost more than the initial price of the ticket.

And this is not even considering the entire air travel experience at airports.

Any fair anhedonic quality adjustment to air travel would double the CPI cost of a $300 ticket to $600 to reflect the staggering decline in quality, service and enjoyment.

Let's next consider computers. While the BLS is busy lowering the CPI price of computers due to faster processors, more memory, etc., the degradation of the utility of computers and enjoyment (i.e. ease of use) is ignored.

Consider the "innovation" of Windows 10, Microsoft's replacement of the Windows 7 workhorse operating system. Anyone else getting Win10 error messages demanding that I manually upgrade the BIOS on my laptop in order to get the latest upgrade? No instructions on how to do so are provided by Microsoft, of course.

To the best of my knowledge, Skype and Windows 10 remain incompatible in a variety of subtle and mysterious ways. Microsoft owns Skype, so welcome to Anhedonia. Please don't tell me the sudden failure of Skype on Win10 machines isn't a reality; we've given up even trying.

Then there's the decline in durability, not just in computers but in everything. Brand-new Corporate America appliances are rusting along the bottom within a year, almost-new U.S. branded ovens turn on by themselves, and the repair of the defective sensor costs more than the entire stove/oven itself–I could go on and on, but you have your own stories of devices and appliances failing or corroding in a few short years.

Water heaters once typically lasted 30 to 40 years. Now we're lucky if they last a decade.

The actual utility of "innovations" is also suspect. New cars have rear-view cameras to promote safe reversing, but some of the screens are so small and prone to glare that they're actually worse than having no rear-view screen at all, as drivers slavishly attempt to make use of the glare-ridden screens to the detriment of their driving skills.

And how about that college diploma that now costs $120,000 and up? Has the utility value increased or decreased?? How about the effectiveness of healthcare in terms of improving health and healthy longevity? How about the immense suffering created by addiction to supposedly "safe" and "non-addictive" opioid medications? Did the BLS calculate the CPI cost adjustment of the gargantuan decline in the quality of our national life due to the widespread distribution of addictive opioids?

If we could be honest with ourselves, we would have to conclude that any comprehensive accounting of anhedonic quality adjustments would double or triple the rate of inflation as measured by the Consumer Price Index.

The quality, durability, utility and enjoyment-of-use of our products and services has been plummeting for years. This is a core reason why the official rate of inflation/CPI is a complete joke. Welcome to Anhedonia.

Of related interest:

Earn 25,000 Points To Nowhere (July 24, 2013) (humor)

My 31-Year Old Apple Mac Started Up Fine After 15 Years in a Box (February 28, 2015)

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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

Apparently, possessing the largest nuclear arsenal in the world isn’t enough for President Donald Trump. To wit, NBC News is reporting that Trump had asked for a nearly tenfold increase in the US’s nuclear arsenal during a Pentagon defense briefing in July involving several of the administration's most-senior officials.

According to the officials present at the meeting, Trump’s advisers, among them the Joint Chiefs of Staff and Secretary of State Rex Tillerson, were surprised by Trump's request, and quickly explained the legal and practical impediments to a nuclear buildup and how the current military posture is stronger than it was at the height of the build-up. In interviews. The president reportedly relented, and no such expansion is planned.

The description of the meeting was presumably leaked to NBC by the same sources who furnished the story about Tillerson’s now-infamous “moron” comment.

NBC reported that officials who lingered behind after the contentious July 20 security review heard Tillerson call the president a moron – suggesting that Tillerson made the comment in response to Trump’s nuclear ask.

However, NBC clarified that it’s unclear which portion of the Pentagon briefing prompted Tillerson’s comment because officials who attended the two-hour session said it included a number of tense exchanges.

The revelation comes as the US and South Korea are bracing for North Korea to test more short-range rockets around the opening of the Chinese Communist Party’s twice-a-decade congress on Oct. 18. Trump also recently revealed that his administration wouldn’t certify the Iran deal, leaving it to Congress to decide if the country has complied with the terms of the 2015 multilateral Iranian nuclear deal.  

Trump convened a meeting Tuesday with his national security team in which they discussed “a range of options to respond to any form of North Korean aggression or, if necessary, to prevent North Korea from threatening the US and its allies with nuclear weapons,” according to the White House.

Several people who attended the meeting said they didn’t believe the president’s comments represented a literal desire for the military to increase its stockpiles of nuclear missiles, but instead were rooted in Trump's limited und nuclear issues. The remark followed a presentation comparing the US’s nuclear capabilities with those of Russia.

Two officials present said that at multiple points in the discussion, the president expressed a desire not just for more nuclear weapons, but for additional US troops and military equipment.

As NBC pointed out, any increase in America’s nuclear arsenal would not only break with decades of US nuclear doctrine but also violate international disarmament treaties signed by every president since Ronald Reagan, potentially triggering the first nuclear arms race since the end of the Cold War.

“If he were to increase the numbers, the Russians would match him, and the Chinese” would ramp up their nuclear ambitions, Joe Cirincione, a nuclear expert and MSNBC contributor, said, referring to the president.

 

“There hasn’t been a military mission that’s required a nuclear weapon in 71 years,” Cirincione said.

Of course, this isn’t the first time that Trump suggested the nuclear arsenal should be expanded. Before the inauguration, then president-elect Trump tweeted that the US “must greatly expand its nuclear arsenal.” It’s also not the first time that the president reportedly demonstrated ignorance about nuclear weapons policy. MSNBC reported that Trump once asked advisers why the US didn’t use its nuclear arsenal more often.

Trump tweeted a video of himself and Vice President Mike Pence leaving the Pentagon following the July 20 meeting.

According to NBC, the July 20 meeting was the second in a series of national security-focused meetings that reportedly left Trump’s military advisers feeling frustrated by the president’s ignorance about foreign policy issues.

That meeting followed one held a day earlier in the White House Situation Room focused on Afghanistan in which the president stunned some of his national security team. At that July 19 meeting, according to senior administration officials, Trump asked military leaders to fire the commander of U.S. forces in Afghanistan and compared their advice to that of a New York restaurant consultant whose poor judgment cost a business valuable time and money.

 

Two people familiar with the discussion said the Situation Room meeting, in which the president’s advisers anticipated he would sign off on a new Afghanistan strategy, was so unproductive that the advisers decided to continue the discussion at the Pentagon the next day in a smaller setting where the president could perhaps be more focused. “It wasn’t just the number of people. It was the idea of focus,” according to one person familiar with the discussion. The thinking was: “Maybe we need to slow down a little and explain the whole world” from a big-picture perspective, this person said.

The July 20 meeting was also attended by Vice President Mike Pence, Treasury Secretary Steven Mnuchin, Defense Secretary James Mattis, Chairman of the Joint Chiefs General Joseph Dunford, Vice Chairman Gen. Paul Selva, Undersecretary of Defense Patrick Shanahan, Stephen Bannon, who served then as Trump’s chief strategist, Jared Kushner who is a senior adviser to the president and Reince Preibus who was then chief of staff. Sean Spicer who was then White House spokesman, and Keith Schiller who was Director of Oval Office Operations at the time, also accompanied Trump to the Pentagon that day.

Asked for a response to the president’s comments, a White House official speaking only on the condition of anonymity, said that the nuclear arsenal was not a primary topic of the briefing. Dana White, spokesperson for the Pentagon said “the Secretary of Defense has many closed sessions with the president and his cabinet members. Those conversations are privileged.”

However, White House officials say the president supports modernization of the US’s nuclear arsenal, and clarified that his concerns weren’t about having enough nukes, but about the fact that the US stopped investing in the program. 

Still, officials said they are working to address the president’s concerns within the Nuclear Posture Review, which is expected to be finalized by the end of 2017 or early next year.

 

“He’s all in for modernization,” one official said. “His concerns are the U.S. stopped investing in this.”

The Pentagon is currently undergoing the long-planned posture review. Modernizing the arsenal is a step presidents continuously take that doesn’t put the US in violation of treaty obligations, Cirincione said.

“You don’t get in trouble for modernizing. You do get in trouble if you do one of two things: if you increase the numbers. The strategic weapons are treaty limited. Two, if you build a new type of weapon that is prohibited by a treaty,” he said.

Officials present said that Trump’s comments on a significantly increased arsenal came in response to a briefing slide that outlined America’s nuclear stockpile over the past 70 years. The president referenced the highest number on the chart — about 32,000 in the late 1960s — and told his team he wanted the U.S. to have that many now, officials said.

via http://ift.tt/2yFbp1Q Tyler Durden

The Fed is dramatically understating real inflation.

As you know, I’ve been very critical of the Fed’s inflation measures for years. The official inflation measure (Consumer Price Index or CPI) does a horrible job of measuring the actual cost of living for Americans.

I have long stated that this is intentional as the purpose of CPI is to hide the true rate of inflation so the Fed can paper over the decline in living standards that has plagued the US for the last few decades.

The Fed isn’t doing this out of ignorance, either. Back in 2002, Fed researchers actually reviewed  the usefulness of its CPI metric for forecasting inflation.

The results were not pretty. In fact, the Fed discovered that its official measures of inflation (CPI and PCE) do a horrible job of predicting future inflation.

So what does predict future inflation accurately?

FOOD prices.

We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all…

http://ift.tt/2ygqTss…

I want you to focus on these two admissions:

1)   The Fed has admitted that its official inflation measures do not accurately predict future inflation.

2)   The Fed admitted that FOOD prices are a much better predictor of future inflation. In fact food prices were a better predictor of inflation than the Fed’s PCE, non-durables goods, transportation services, housing, clothing, energy and more.

Put simply, if you want to predict inflation well… you NEED to look at food prices.

With that in mind, food inflation is on the rise. As a whole, Food and Beverage inflation has broken out of a descending wedge pattern (blue lines) in the context of a massive wedge triangle pattern (purples lines). We’re heading for a test of the upper purple line shortly.

Overall inflation will be following by a few months, but it’s coming. 

Put simply, inflation is rising. And at it is going to be getting worse in the weeks and months ahead. Why do you think the $USD has dumped 10% this year already?

This is THE BIG MONEY trend today. And smart investors will use it to generate literal fortunes.

We just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

http://ift.tt/2knowyr

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

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