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Submitted by Robert Parrry via Strategic-Culture.org,

As Democrats, the Obama administration and some neocon Republicans slide deeper into conspiracy theories about how Russia somehow handed the presidency to Donald Trump, they are behaving as they accused Trump of planning to behave if he had lost, questioning the legitimacy of the electoral process and sowing doubts about American democracy.

The thinking then was that if Trump had lost, he would have cited suspicions of voter fraud – possibly claiming that illegal Mexican immigrants had snuck into the polls to tip the election to Hillary Clinton – and Trump was widely condemned for even discussing the possibility of challenging the election’s outcome.

His refusal to commit to accepting the results was front-page news for days with leading editorialists declaring that his failure to announce that he would abide by the outcome disqualified him from the presidency.

But now the defeated Democrats and some anti-Trump neoconservatives in the Republican Party are jumping up and down about how Russia supposedly tainted the election by revealing information about the Democrats and the Clinton campaign.

Though there appears to be no hard evidence that the Russians did any such thing, the Obama administration’s CIA has thrown its weight behind the suspicions, basing its conclusions on “circumstantial evidence,” according to a report in The New York Times.

The Times reported: “The C.I.A.’s conclusion does not appear to be the product of specific new intelligence obtained since the election, several American officials, including some who had read the agency’s briefing, said on Sunday. Rather, it was an analysis of what many believe is overwhelming circumstantial evidence — evidence that others feel does not support firm judgments — that the Russians put a thumb on the scale for Mr. Trump, and got their desired outcome.”

In other words, the CIA apparently lacks direct reporting from a source inside the Kremlin or an electronic intercept in which Russian President Vladimir Putin or another senior official orders Russian operatives to tilt the U.S. election in favor of Trump.

More ‘Group Thinking’?

The absence of such hard evidence opens the door to what is called “confirmation bias” or analytical “group think” in which the CIA’s institutional animosity toward Russia and Trump could influence how analysts read otherwise innocent developments.

For instance, Russian news agencies RT or Sputnik reported critically at times about Democratic nominee Hillary Clinton, a complaint that has been raised repeatedly in U.S. press accounts arguing that Russia interfered in the U.S. election. But that charge assumes two things: that Clinton did not deserve critical coverage and that Americans – in any significant numbers – watch Russian networks.

Similarly, the yet-unproven charge that Russia organized the hacking of Democratic National Committee emails and the private email account of Clinton’s campaign chairman John Podesta assumes that the Russian government was responsible and that it then selectively leaked the material to WikiLeaks while withholding damaging information from hacked Republican accounts.

Here the suspicions also seem to extend far beyond what the CIA actually knows. First, the Republican National Committee denies that its email accounts were hacked, and even if they were hacked, there’s no evidence that they contained any information that was particularly newsworthy. Nor is there any evidence that – if the GOP accounts were hacked – they were hacked by the same group that hacked the Democratic Party emails, i.e., that the two hacks were part of the same operation.

That suspicion assumes a tightly controlled operation at the highest levels of the Russian government, but the CIA – with its intensive electronic surveillance of the Russian government and human sources inside the Kremlin – appears to lack any evidence of such a top-down operation.

Second, WikiLeaks editor Julian Assange directly denies that he received the Democratic leaked emails from the Russian government and one of his associates, former British Ambassador Craig Murray, told the U.K. Guardian that he knows who “leaked” the Democratic emails and that there never was a “hack,” i.e. an outside electronic penetration of an email account.

Murray said, “I’ve met the person who leaked them, and they are certainly not Russian and it’s an insider. It’s a leak, not a hack; the two are different things.”

‘Real News’

But even if Assange did get the data from the Russians, it’s important to remember that nothing in the material has been identified as false. It all appears to be truthful and none of it represented an egregious violation of privacy with some salacious or sensational angle.

The only reason the emails were newsworthy at all was that the documents revealed information that the DNC and the Clinton campaign were trying to keep secret from the American voters.

For instance, some emails confirmed Sen. Bernie Sanders’s suspicions that the DNC was improperly tilting the nomination race in favor of Clinton. The DNC was lying when it denied having an institutional thumb on the scales for Clinton. Thus, even if the Russians did uncover this evidence and did leak it to WikiLeaks, they would only have been informing the American people about the DNC’s abuse of the democratic process, something Democratic voters in particular had a right to know.

And, regarding Podesta’s emails, their most important revelation related to the partial transcripts of Clinton’s paid speeches to Wall Street banks, the contents of which Clinton had chosen to hide from the American people. So, again, if the Russians were involved in the leak, they would only have been giving to the voters information that Clinton should have released on her own. In other words, these disclosures are clearly not “fake news” – the other hysteria now sweeping Official Washington.

In the mainstream news media, there has been a clumsy effort to conflate these parallel frenzies, the leak of “real news” and the invention of “fake news.” But investigations of so-called “fake news” have revealed that these operations were run mostly by young entrepreneurs in places like Macedonia or Georgia who realized they could make advertising dollars by creating outlandish “click bait” stories that Trump partisans were particularly eager to read.

According to a New York Times investigation into one of the “fake news” sites, a college student in Tbilisi, Georgia, first tried to create a pro-Clinton “click bait” Web site but found that a pro-Trump operation was vastly more lucrative. This and other investigations did not trace the “fake news” sites back to Russia or any other government.

So, what’s perhaps most telling about the information that the CIA has accused Russia of sharing with the American people is that it was all “real news” about newsworthy topics.

What Threat to Democracy?

So, how does giving the American people truthful and relevant information undermine American democracy, which is the claim that is reverberating throughout the mainstream media and across Official Washington?

Presumably, the thinking is that it would have been better for the American people to have been kept in the dark about these secret maneuverings by the DNC and the Clinton campaign and, by keeping the public ignorant, that would have ensured Clinton’s election, the preferred outcome of the major U.S. news media.

There’s another double standard here. For instance, when a hack of — or a leak from — a Panamanian law firm exposed the personal finances of thousands of clients, including political figures in Iceland, Ukraine, Russia and other nations, there was widespread applause across the Western media for this example of journalism at its best.

The applause was deafening despite the fact that at least one of the principal “news agencies” involved was partly funded by the U.S. government. The Organized Crime and Corruption Reporting Project (OCCRP), a USAID-backed non-governmental organization, also was earlier involved in efforts to destabilize and delegitimize the elected Ukrainian government of President Viktor Yanukovych.

“Corruption” allegations against Yanukovych – pushed by OCCRP – were integral to the U.S.-supported effort to organize a violent putsch that drove Yanukovych from office on Feb. 22, 2014, touching off the Ukrainian civil war and – on a global scale – the New Cold War with Russia.

Yet, in the case of the “Panama Papers” or other leaks about “corruption” in governments targeted by U.S. officials for “regime change,” there are no frenzied investigations into where the information originated. Regarding the “Panama Papers,” there was simply back-slapping for the organizations that invested time and money in analyzing the volumes of material. And there were cheers when implicated officials were punished or forced to step down.

So, why are some leaks “good” and others “bad”? Why do we hail the “Panama Papers” or OCCRP’s “corruption evidence” that damaged Yanukovych – and ask no questions about where the material came from and how it was selectively used – yet we condemn the Democratic email leaks and undertake investigations into the source of the information?

In both the “Panama Papers” case and the “Democratic Party leaks,” the material appeared to be real. There was no evidence of disinformation or “black propaganda.” But, apparently, it’s okay to disrupt the politics of Iceland, Ukraine, Russia and other countries, but it is called a potential “act of war” – by neocon Sen. John McCain, R-Arizona – to reveal evidence of wrongdoing or excessive secrecy on the part of the Democratic Party in the United States.

Shoe on the Other Foot

Russian President Putin, while denying any Russian government attempt to tilt the election to Trump, recently commented on the American hypocrisy about interfering in other nations’ elections while complaining about alleged interference in its own or those of its allies. He described a conversation with an unnamed Western “colleague.”

Putin said, “I recently had a conversation with one of my colleagues. We touched upon our [Russian] alleged influence on some political processes abroad. I told him: ‘And what are you doing? You have been constantly interfering in our political life.’ And he replied: ‘It’s not us, it’s the NGOs’. I said: ‘Oh? But you pay them and write instructions for them.’ He said: ‘What kind of instructions?’ I said: ‘I have been reading them.’”

Whatever one thinks of Putin, he is not wrong in describing how various U.S.-funded NGOs, in the name of “democracy promotion,” seek to undermine governments that have ended up on Official Washington’s target list.

And another aspect of the hypocrisy permeating Official Washington’s belligerent rhetoric directed toward Russia: Aren’t the Democrats doing exactly what they accused Trump of planning to do if he had lost the Nov. 8 election, i.e., question the legitimacy of the results and thus undermine the faith of the American people in their democratic system?

For days, Trump’s unwillingness to accept, presumptively, the results of the election earned him front-page denunciations from many of the same mainstream newspapers and TV networks that are now trumpeting the unproven claims by the CIA that the Russians somehow influenced the election’s outcome by presenting some Democratic hidden facts to the American people.

Yet, this anti-Russian accusation not only undermines the American people’s faith in the election’s outcome but also represents a reckless last-ditch gamble to block Trump’s inauguration – or at least discredit him before he takes office – while using belligerent rhetoric that could push Russia and the United States closer to nuclear war.

Wouldn’t it be a good idea for the CIA to at least have hard evidence before the spy agency precipitated such a crisis?

via http://ift.tt/2h68Dq6 Tyler Durden

Apparently Trump’s recent letter to the Energy Department, which included very pointed questions about climate change research, and/or his appointment of former Texas Governor Rick Perry to lead that department going forward (a department that Perry proposed shutting down back in 2012 for those who may have forgotten), “triggered” California’s head snowflake, Governor Jerry Brown, into an epic climate change rant before a gathering of scientists at the American Geophysical Union’s national conference in San Francisco. 

Vowing to defy Trump’s efforts to undermine the “progress” made by California on climate change regulations, Brown promised that his state is “ready to fight.”

“We’ve got the scientists, we’ve got the lawyers and we’re ready to fight.”

 

“Some people say that they’re going to turn off the satellites that are monitoring the climate.  I remember back in 1978 I proposed a satellite for California.  They called me Governor Moonbeam because of that.  I didn’t get that moniker for nothing.  And if Trump turns off his satellites, California will launch it’s own damn satellites.  We’re going to collect that data.”

Apparently, Brown is also not a big fan of Rick Perry…

“I remember our new Secretary of Energy, he was coming to California and saying ‘come to Texas because we have all the jobs in Texas.’  Well, California is growing a hell of a lot faster than Texas.  And we got more sun than you have oil.”

Meanwhile, Brown also took a shot at “fake news” outlets like Breitbart who decided to poke fun at his new regulation passed back in September that requires the state to cut methane emissions from dairy cows and other animals by 40% by 2030.  Brown apparently took issue with a Breitbart headline that declared he was attempting to regulate “cow farts.”

“The measures on methane that I signed into law, Breitbart and the other clowns talked about cow farts.  That’s what they reduce.  Everything’s reduced from seriousness to a joke.  Well, it’s not a joke.” 

While we’re not sure which organizations he’s referencing with his “other clowns” comment, we tend to agree with Brown on this front…no serious news organization would ever post such a ridiculous headline about “cow farts.”

 

With that, here is the full rant from Jerry…enjoy.

via http://ift.tt/2hq0jEH Tyler Durden

One by one, all the mainstream media outlets are announcing they will join Facebook’s “fight” against “fraudulent stories” and the “scourge of fake news” to be defined arbitrarily by said media outlets. First it was “fact-checkers” such as Snopes and Politifact, now it’s AP, and soon to follow, the rest of the mainstream.

From AP’s blog:

The fight against fake news

As part of its broader fact-checking efforts, The Associated Press announced Thursday that it will work with Facebook to help identify and debunk trending “news” stories being shared online that are false.

It is our job – more than ever before – to guide people to legitimate news and help them sort out “fake news” from the real thing.The AP has a critical role to play in fighting the scourge of fake news. We are not going to transform ourselves into the fake news police of the internet, but we are going to be more aggressive about knocking down fraudulent stories when we can.

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

When I was growing up in the Soviet Union, our local grocery store had two types of sugar: The cheap one was priced at 96 kopecks (Russian cents) a kilo and the expensive one at 104 kopecks. I vividly remember these prices because they didn’t change for a decade. The prices were not set by sugar supply and demand but were determined by a well-meaning bureaucrat (who may even have been an economist) a thousand miles away. If all Russian housewives (and househusbands) had decided to go on an apple pie diet and started baking pies for breakfast, lunch and dinner, sugar demand would have increased but the prices still would have been 96 and 104 kopecks. As a result, we would have had a shortage of sugar — a very common occurrence in the Soviet era.

In a capitalist economy, the invisible hand serves a very important but underappreciated role: It is a signaling mechanism that helps balance supply and demand. High demand leads to higher prices, telegraphing suppliers that they’ll make more money if they produce extra goods. Additional supply lowers prices, bringing them to a new equilibrium. I am slightly embarrassed as I write this, because you may confuse me for an economist — I am not one. But this is how prices are set for millions of goods globally on a daily basis in free-market economies.

In the command-and-control economy of the Soviet Union, the prices of goods often had little to do with supply and demand but were instead typically used as a political tool. This in part is why the Soviet economy failed — to make good decisions you need good data, and if price carries no data, it is hard to make good business decisions.

When I left Soviet Russia in 1991, I thought I would never see a command-and-control economy again. I was wrong. Over the past decade our global economy has started to resemble one, as the well-meaning economists running central banks have been setting the price for the most important commodity in the world: money. Interest rates are the price of money, and the daily decisions of billions of people and their corporations and governments should determine them. Like the price of sugar in Soviet Russia, interest rates today have little to do with supply and demand (and thus have zero signaling value).

For instance, if the Federal Reserve hadn’t bought over $2 trillion of U.S. debt by late 2014 when U.S. government debt crossed the $17 trillion mark, interest rates might have started to go up and our budget deficit would have increased and forced politicians to cut government spending. But the opposite has happened: As our debt pile has grown, the government’s cost of borrowing has declined.

The consequences of well-meaning (but not all-knowing) economists setting the cost of money are widespread, from the inflation of asset prices to encouraging companies to spend on projects they shouldn’t. But we really don’t know the second, third and fourth derivatives of the consequences that command-control interest rates will bring. We know that most likely every market participant was forced to take on more risk in recent years, but we don’t know how much more because we don’t know the price of money.

Quantitative easing: These two seemingly harmless words have mutated the DNA of the global economy. Interest rates heavily influence currency exchange rates. Anticipation of QE by the European Union caused the price of the Swiss franc to jump 15 percent in one day in January 2015, and the Swiss economy has been crippled ever since.

Americans have a healthy distrust of their politicians. We expect our politicians to be corrupt. We don’t worship our leaders (only the dead ones). The U.S. Constitution is full of checks and balances to make sure that when (often not if) the opium of power goes to a politician’s head, the damage he or she can do to society is limited.

Unfortunately, we don’t share the same distrust for economists and central bankers. It’s hard to say exactly why. Maybe we are in awe of their Ph.D.s. Or maybe it’s because they sound very smart and at the same time make us feel dumber than a toaster when they use big econ terms like “aggregate demand” or “degenerate equilibrium” (okay, I made up the last one). Or simply because they often look just like our well-meaning grandparents. For whatever reason, we think they possess foresight and the powers of Marvel superheroes.

Warren Buffett — the Oracle of Omaha himself — admitted that he doesn’t know how the QE experiment will end. And if you think well-meaning economists running central banks know, you may have another thing coming.

Alan Greenspan — the ex-pope of the Federal Reserve — in a 2013 interview with the Wall Street Journal said that he “always considered [himself] more of a mathematician than a psychologist.” But after the financial crisis, and the criticism he received for contributing to the housing bubble at the core of it, Greenspan went back and studied herd behavior, with some surprising results. “I was actually flabbergasted,” he admitted. “It upended my view of how the world works.”

Just as the well-meaning economist of the Soviet Union didn’t know the correct price of sugar, nor do the good-intentioned economists of our global central banks know where interest rates should be. Even more important, they can’t predict the consequences of their actions.

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley) and The Little Book of Sideways Markets (Wiley).  

His books were translated into eight languages.  Forbes Magazine called him “The new Benjamin Graham”.   To receive Vitaliy’s future articles by email or read his articles click here.

via http://ift.tt/2gGQNsV Vitaliy Katsenelson

China issued its loudest semi-official response to Trump’s suggestion that he will use the “One China” policy as a bargainining chip.

The first, and more official one, came from China’s ambassador to the United States who said on Wednesday that Beijing would never bargain with Washington over issues involving its national sovereignty or territorial integrity. Ambassador Cui Tiankai, speaking to executives of top U.S. companies, said China and the United States needed to work to strengthen their relationship. “The political foundation of China-U.S. relations should not be undermined. It should be preserved,” Cui said. “And basic norms of international relations should be observed, not ignored, certainly not be seen as something you can trade off,” he said. “And indeed, national sovereignty and territorial integrity are not bargaining chips. Absolutely not. I hope everybody would understand that.”

While he did not specifically mention Taiwan, or Trump’s comments last weekend that the United States did not necessarily have to stick to its nearly four-decade policy of recognizing that Taiwan is part of “one China”, it was heard loud and clear.

The second, and more worrisome warning, came from China’s influential state-run tabloid, one which Beijing tends to use for populist “trial balloon” purposes, the Global Times according to which China should take the lead in deciding the island’s future. In the op-ed, the authors say “it might be time for the Chinese mainland to reformulate its Taiwan policy” and that Beijing should plan to take Taiwan by force and make swift preparations for a military incursion. The article urged China to rebalance its stance towards Taiwan to “make the use of force as a main option” and carefully prepare for possible moves toward independence.

It cautioned that the chance of peaceful unification “will only slip away” if the mainland doesn’t increase pressure and that “the military status quo across the Taiwan Straits needs to be reshaped” to punish the current Taiwanese administration’s “destruction of the political status quo in cross-Straits ties.”

The belligerent tone continued, urging that “once Taiwan independence forces violate the Anti-Secession Law, the Chinese mainland can in no time punish them militarily”

It warned that “the tacit understanding and hidden rules made between China and the U.S. over the Taiwan Straits can hardly be respected for long.”

Chinese officials have already used less drastic “punishments”, such as limiting the number of mainland tourists to Taiwan and hinting at curtailing investments.

As the Guardian adds, the threat of military action has loomed over Taiwan’s population since the 1950s. In the most dramatic confrontation, China fired missiles into the waters separating it from Taiwan in the run-up to the first free elections in 1996. In response, the US sailed an aircraft carrier through the strait in a show of solidarity.

In the Global Times op-ed, the authors warn that “if the Chinese mainland won’t pile on more pressure over realizing reunification by using force, the chance of peaceful unification will only slip away. Independent forces on the island publicly believe that time is on their side, because Taiwan people’s recognition of their Chinese identity is gradually decreasing and against such a backdrop, they can turn the tables with the help of international forces.”

It concludes as belligerently as it began: “The future of Taiwan must not be shaped by the DPP and Washington, but by the Chinese mainland. It is hoped that peace in the Taiwan Straits won’t be disrupted. But the Chinese mainland should display its resolution to recover Taiwan by force. Peace does not belong to cowards.“

The problem is that Donald Trump most likely agrees with the final statement, which is why what until now has been only a war of words for decades, may soon heat up substanitally.

via http://ift.tt/2h6a7R9 Tyler Durden

While we often highlight the collapse of Venezuela’s currency, the Bolivar, which just two weeks ago hit an all time low of 4,609 Bolivars to the dollar in the black market losing 60% of its value in one month, as socialism hits its terminal phase, we should also note that what goes down, must sometimes come up and in a surprising twist, over the past few days, the Bolivar has been the best (if only temporarily) performing currency in the world…

… soaring by over 60% since the start of the month.

That said, extending the time frame of the move puts it in the proper context – after a dramatic collapse which devalued the Bolivar from 1,000 to over 4,600 against the dollar, in less than a year, the currency has managed to recoup roughly half of the losses:

So while we congratulate anyone who bottom-ticked that particular move (and can now take both 2016 and 2017 off) having first found some exchange that actually trades the black market Bolivar, what is more interesting is the perplexing reason for the surge: according to Nomura analyst Siobhan Morden, the reason for the Bolivar’s massive – if transitory 0 gain on the black market over the past few days, is due to the collapse in the Venezuela money supply as the nation transitions to higher-currency notes!

Specifically, as a result of Maduro’s attempt to copycat India and withdraw more than 75% of the paper currency in circulation by eliminating 100-bolivar notes, there has been not only a dramatic decline in liquidity but also a collapse in dollar demand, according to the chief economist at Torino. Which, ironically, means that Maduro may have actually pulled off one of his goals, the halting of conversion of Bolivars into dollars.

So for now, Maduro has managed to extract a very curious currency market victory. There is just one fly in the ointment: once Venezuela restores some semblance of paper currency, the outflows into the dollar and other stable currencies will return, and the collapse will resume. Which, of course, assumes that Venezuela will be able to do that – according to numerous media accounts, Venezuela will be nowhere near ready to implement the conversion to “new”, higher denomination banknotes on time, if ever, and its already imploding economy may simply convert to a permanent state of barter.

One thing that we know for certain, is that the spike in the Bolivar has nothing to do with an improvement in the economy. According to the latest report “on the ground” from Venezuela, this time by Reuters, struggling parents are now giving their children away to neighbors, or simply abandoning them outright, as they see no hope whatsoever. 

Struggling to feed herself and her seven children, Venezuelan mother Zulay Pulgar asked a neighbor in October to take over care of her six-year-old daughter, a victim of a pummeling economic crisis.The family lives on Pulgar’s father’s pension, worth $6 a month at the black market rate, in a country where prices for many basic goods are surpassing those in the United States.

 

 

“It’s better that she has another family than go into prostitution, drugs or die of hunger,” the 43-year-old unemployed mother said, sitting outside her dilapidated home with her five-year-old son, father and unemployed husband. With average wages less than the equivalent of $50 a month at black market rates, three local councils and four national welfare groups all confirmed an increase in parents handing children over to the state, charities or friends and family.

 

The trend highlights Venezuela’s fraying social fabric and the heavy toll that a deep recession and soaring inflation are taking on the country with the world’s largest oil  reserves.

 

Nancy Garcia, the 54-year-old neighbor who took in the girl, Pulgar’s second-youngest child, works in a grocery store and has five children of her own. She said she could not bear to see Pulgar’s child going without food. “My husband, my children and I teach her to behave, how to study, to dress, to talk… She now calls me ‘mom’ and my husband ‘dad,'” said Garcia.

 

Two-thirds of 1,099 households with children in Caracas, ranging across social classes, said they were not eating enough in a survey released last week by children’s’ rights group Cecodap.

In some cases, parents are simply abandoning their kids.

Last month, a baby boy was found inside a bag in a relatively wealthy area of Caracas and a malnourished one-year-old boy was found abandoned in a cardboard box in the eastern city of Ciudad Guayana, local media reported.

 

There are also more cases of children begging or prostituting themselves, according to welfare workers.

 

Abortion is illegal in Venezuela and contraception, including condoms, is extremely hard to find.

How does the mother who handed over her girl feel?

Pulgar was relieved that her child was being looked after properly by her neighbor. “My girl has totally changed,” she said as another son clambered over her, adding that even her manner of speaking had improved. She said she would love to take the child back one day but does not see her situation improving.

Her sad conclusion: “This is written in the Bible. We’re living the end times.” Which, incidentally, may be a good enough reason as any to resume shorting the Bolivar…

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

Submitted by Pater Tenebrarum via Acting-Man.com,

A Quick Chart Overview

Below is an overview of charts we picked to illustrate the current market situation. The selection is a bit random, but not entirely so. The first set of charts concerns positioning and sentiment. As one would expect, these look fairly stretched at the moment, but there are always ways in which they could become even more stretched. First a look at the NAAIM exposure index:

 

At 101.6% net long (responses can range from 200% leveraged short to 200% leveraged long), fund managers taking part in this survey have reached a fairly one-sided extreme – click to enlarge.

 

What is even more remarkable than the overall positioning extreme is the fact that there were literally zero bears in the NAAIM survey for the past three weeks. In case you’re wondering, that doesn’t happen very often.

At one point even the most bearish manager was slightly net long. Not too long ago the biggest bears were actually up to 150% net short for quite a while, but their conviction has been destroyed by the post election rally. One cannot blame them, but it is still a case of remarkable unanimity regarding any remaining downside potential.

Here is a table showing the progression:

 

The biggest NAAIM bears have quickly moved from 150% net short to not short at all – the biggest bulls remain 200% leveraged long – click to enlarge.

 

Next up, a combination of “risk appetite indexes” calculated by sentimentrader (combines the Citigroup Macro Risk Index, Westpac Risk Aversion Index and UBS G10 Carry Risk Index Plus).

 

Risk appetite is at a multiyear high – note that this index combo is solely based on market data/ prices, there are no opinions involved – click to enlarge.

 

As can be seen, the Risk Appetite Index combo is firmly in blue sky territory  – it is not useful as a timing indicator, but it does show that there is currently absolutely no doubt visible in any market-based indicators or prices. Everybody “knows” where the journey is going.

That is certainly interesting, since Donald Trump was supposed to create uncertainty galore – but currently certainty is actually at a three year high! As an example of Trump-related expectations, here is Paul Krugman on election night:

“If the question is when markets will recover, a first-pass answer is never.”

This was undoubtedly a wide-spread opinion when the election result became clear, with Dow futures down by more than 900 points in Asian trade overnight. So far it was the shortest “never” ever though.

Next up, the equity put-call ratio. What is interesting here is that it has recently plummeted to a low last seen in June 2015. Both marked short term peaks in trader enthusiasm.

 

Two rare peaks in the short term enthusiasm of option traders – June 2015 and December 2016 – click to enlarge.

 

What about other equity market drivers? As we have recently pointed out, US money supply growth has re-accelerated significantly (see: “US Money Supply Growth Jumps, Part 1”). A quick aside to this: Part 2, in which we will go into details regarding the shifts described in the part 1, will be published next week.

We reproduce two of the charts here that illustrate the recent surge in money supply growth – the y/y growth rate of TMS-2 (broad true money supply) and money AMS (adjusted money supply, a narrow true money supply measure calculated by Dr. Frank Shostak).

 

US broad true money supply growth was back up at 11.2% y/y as of the end of October – click to enlarge.

 

There is plenty of liquidity in the US  – the y/y growth rate of AMS recently spiked to levels that haven’t been seen in a very long time:

 

US AMS (adjusted money supply), y/y growth – at the recent peak the growth rate reached the highest level in ages – click to enlarge.

 

We caution that there are very specific reasons for this, and they have noting to do with growth in commercial bank lending to non-financial sectors in the US.

Nevertheless, liquidity is certainly supportive for the stock market at present. Another supportive datum in the short term is the stock market’s seasonal trend. First a look at the 30-year seasonal chart of the SPX – the year-end rally (Dec. 16 to Jan  03) is highlighted:

 

A 30-year seasonal chart of the S&P 500 Index

 

Between Dec. 16 and Jan 3, the market has risen in 24 of the past 30 years, with an average annualized gain of more than 50% (producing about one quarter of the average annual return of the S&P 500). Seasonals therefore still favor market strength in the short term. Note though that last year the market had its weakest year-end performance in 30 years.

Here is a chart that shows the market’s performance in the time period Dec. 16 to Jan. 03 in every single year since 1986:

 

The year-end rally in every year since 1986

 

This is a very reliable pattern in other words; while the market is already quite overbought this year as we enter the final stretch, one shouldn’t be surprised if it worked this year as well. Momentum is still on the side of the bulls.

We are adding a bonus chart – the “at what level does the yuan create panicky feelings?” chart. Not at 6.90, evidently. It did at 6.40 though.

 

The onshore USD-CNY rate – global panic at 6.40, perfect serenity at 6.90 – click to enlarge.

 

We mention this only to show that most ex-post rationalizations of short term market moves really don’t mean much. These moves are always driven by perceptions and sentiment and the totality of the backdrop. But people always  want a simple answer to the question “why has the market done X”, so the financial media will provide one.

The weakening yuan (and the associated foreign exchange outflows from China) strikes us as one of the many things that simply don’t matter until they do. The same can probably be said of bond yields.

 

Conclusion

Risk has been banished and lives now in exile somewhere, well out of sight.  Uncertainty has become certainty across the board. Given recent positioning extremes, risk may soon send a brief message, just to remind us that it isn’t quite dead yet.

We will leave you with this: Donald Trump may well succeed in instituting policies that are positive for the economy – which is the perception the recent moves in risk assets are based on. But he doesn’t have a time machine. He cannot go back and retroactively stop the 135% expansion in the broad true money supply since 2008 (US) and the associated explosion in debt levels. He would not only need a time machine for this, but nigh divine powers of intervention as well.

And that means that even if the current wave of optimism should turn out to be justified in principle (which remains to be seen), the economy is still structurally distorted. It will still require a bust to return it to a sound foundation from which a genuine, sustainable recovery can ensue.

This is of course assuming that we haven’t somehow stumbled on the secret of the free lunch.

 

Lunch is served, but it is really free?

via http://ift.tt/2hCi0Pa Tyler Durden

What will they call this “crisis”?

 

(click image for large legible version)

It appears “king dollar”‘s strength may not represent the “strength of the US economy” after all. As we noted previously, a strong dollar may not be the ‘unambiguously good’ thing so many proclaim it to be. However,
with the rest of the world competitively weakening their currencies (in
order to ‘help’ their economies), we hope the chart above will help
readers decide which they prefer… a stronger (US
multinational-crushing) dollar or a weak (domestic drag) dollar?

via http://ift.tt/2hTD9n7 Tyler Durden

What will they call this “crisis”?

 

(click image for large legible version)

It appears “king dollar”‘s strength may not represent the “strength of the US economy” after all. As we noted previously, a strong dollar may not be the ‘unambiguously good’ thing so many proclaim it to be. However,
with the rest of the world competitively weakening their currencies (in
order to ‘help’ their economies), we hope the chart above will help
readers decide which they prefer… a stronger (US
multinational-crushing) dollar or a weak (domestic drag) dollar?

via http://ift.tt/2hTD9n7 Tyler Durden

What will they call this “crisis”?

 

(click image for large legible version)

It appears “king dollar”‘s strength may not represent the “strength of the US economy” after all. As we noted previously, a strong dollar may not be the ‘unambiguously good’ thing so many proclaim it to be. However,
with the rest of the world competitively weakening their currencies (in
order to ‘help’ their economies), we hope the chart above will help
readers decide which they prefer… a stronger (US
multinational-crushing) dollar or a weak (domestic drag) dollar?

via http://ift.tt/2hTD9n7 Tyler Durden