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It was just seven weeks ago when we said the following about Donald Trump and Europe’s increasingly intractable migrant crisis: “Europe’s worsening refugee crisis is in many ways the best thing that could have happened to Donald Trump’s Presidential campaign.”

The rationale behind that comment should have been obvious, but just in case it’s not, here’s the argument. Trump is campaigning on a lot of things, some of them so incoherent that we’re not entirely sure how to go about describing them, but one key part of his “platform” is a strong border.

“We either have a country, or we don’t folks,” he’s particularly fond of saying.

In the first week of his official candidacy, he made America’s porous border with Mexico a key element of the “Trump stump” – if you will – whipping supporters into a frenzy with stories about drug runners and Mexican rapists. His solution: build a wall.

Well it so happens that just a little over two months after Trump made that suggestion, that’s exactly what Hungary’s Viktor Orban did when the daily flow of Mid-East refugees over the Serbian border rose well into the several thousands. Not to put too fine a point on it, but the wall idea seems to work. Here’s a look at the dramatic decline in migrants entering Hungary after Orban’s razor wire fence was constructed:

Initially that move was seen as cruel and Orban was cast by some as a kind of first European mover in the effort to strip away refugees’ basic human rights in the name of preserving Western Europe’s “Christian heritage.”

Fast forward nine months and the mood has changed. Dramatically. Fears of terrorism, rape, assault, and rampant violence plague everyday life for many Europeans and more European equivalents of Trump’s Mexican border wall have been erected in countries other than Hungary.

In many ways, Trump is the leader many Europeans want, even though most would never say so aloud as it flies in the face of everything the bloc is supposed to stand for and recalls the region’s rather uncomfortable past.

Trump has been called a populist, a nationalist, and at worst, a fascist. All of those movements are once again on the rise in Europe largely as a response to the refugee crisis (just look at PEGIDA, and the Soldiers of Odin). Of course there are still those Europeans who find Trump repugnant – the antithesis of an Angela Merkel.

CBC is out with some interesting commentary on all of the above.

“As hundreds of thousands of asylum-seekers continue to land on Europe’s shores, and as an opposing sentiment rises, for some, Trump’s sturdy wall can’t be built here quickly enough,” Foreign Correspondent Nahlah Ayed writes. “The Republican leadership contender’s tough talk on migration, on Muslims, and on Europe’s approach to both, is giving Trump strange but tangible traction on the non-voting side of the Atlantic.”

Here, for instance is what Jean-Marie Le Pen tweeted late last month:

Si j’étais américain, je voterais Donald TRUMP… Mais que Dieu le protège !

— Jean-Marie Le Pen (@lepenjm) February 27, 2016

And then there is of course the incomparable right-wing Dutch politician Geert Wilders (see more on Geert here), who said this:

I hope @realDonaldTrump will be the next US President. Good for America, good for Europe. We need brave leaders. http://pic.twitter.com/FWJSaQdClM

— Geert Wilders (@geertwilderspvv) December 7, 2015

“The immigration issue and the position he’s taken on Mexico, you know, it resonates with many on the European continent,” Peter Trubowitz, director of the London School of Economics’ United States Centre told CBC. “They’re worried about immigration, worried about refugees and it’s probably no surprise that Le Pen endorsed Donald Trump.”

On the other side, are those who say Europeans that support Trump are just as misguided as the Americans who have pledged their vote to the bellicose billionaire. Here’s the front page of last month’s Libération. It reads: “the big idiot on the rise.”

And here’s Der Spiegel with the headline: “Madness: America’s Agitator”

Finally, CBC warns that Trump’s affinity for Vladimir Putin has some Europeans concerned that the US may abandon the “losers” (to use what is by now perhaps the most famous ‘Trumpism’) for someone Trump sees more of himself in.

“The potential for ‘President’ Donald Trump, who actually sees more in common with Putin than with perhaps (U.K. Prime Minister David) Cameron or Merkel, is frightening,” Jacob Parakilas, assistant head of the U.S. and the Americas program at London’s Chatham House told Ayed, adding that “Trump is, in some respects, the ultimate caricature of the ugly American in European eyes.”

So, for all the European readers out there we ask: “Idiot, clown, or hero?”

We close with two clips. The first is Trump on Angela Merkel’s migrant policy. The second is the UK Parliament debating a Trump ban.

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

Submitted by John Rubino via DollarCollapse.com,

Suddenly, gold and silver are good again. In two short months, they’ve morphed from targets of derision to shiny new toys on the financial playground.

Not surprisingly, questions have been pouring in from people who kind-of sort-of know the precious metals story and are wondering if they should jump in with both feet. A reasonable response: “If your time frame is the coming decade, sure, go for it. But if you’re thinking in terms of months rather than years, you should be considering entry points and accumulation strategy.”

Which brings us to the Commitment of Traders (COT) report. Most new precious metals investors have never heard of it. And since it seems to be a pretty good indicator of those metals’ short-term price fluctuations, this might be a useful time to define and explain it. So here goes:

Gold and silver prices are set in the “paper” market where big players trade futures contracts that enable them to buy (or require them to deliver) large amounts of metal at some point in the future. There are two main groups in this market: The “commercials,” including fabricators that buy metal and turn it into coins or jewelry and big banks that trade for their clients and their own accounts, and the “speculators” (hedge funds and other institutional gamblers) who use futures contracts to bet on the metals’ price movements.

 

Over and over again, the commercials trick the speculators into piling in or out at exactly the wrong time, thus moving prices in ways that benefit the former. They might, for instance, sell a few contracts into the market when most traders are at lunch or home for the night, pushing the price down and activating hedge fund stop-loss orders. Those sales push prices down further, activating technical signals that cause momentum traders to short the market, producing yet another sharp drop. Then the commercials step in and buy very cheaply — raising prices a bit and leading speculators to go long, pushing prices back up to where the game began. As observers like to say, “wash, rinse, repeat.”

The COT report quantifies who’s long and who’s short and by how much, which makes it a snapshot of how the above game is going.

Here, for instance, is a chart showing what the speculators are up to. When the blue line depicting their long positions and the red line depicting their shorts diverge, that means hedge funds and other traders have been suckered into betting on a gold price surge. When the lines converge, speculators have been fooled into betting aggressively on a decline. The thin gray line is the price of gold. As you can see it tends to do the opposite of what the speculators expect.

What is this chart saying now? Well, the lines have diverged, indicating that speculators are extremely bullish. History says they are now sheep lining up for slaughter, in the form of a gold price correction which forces them to cover at a loss. So — again, based on history — a better entry point for incoming gold investors might be a few months off.

However — and this is a very big caveat — indicators work until they don’t. Someday the paper markets will be overwhelmed by a tsunami of demand for physical metal. The commodities exchanges on which futures trade will run out of inventory and default when too many holders of long contracts demand delivery, and gold and silver will rocket higher. On that day everyone who isn’t fully invested in precious metals will be out of luck.

And some claim that day is at hand. In a recent King World News interview, metals trader Andrew Maguire noted: “Now that we are entering a negative rate world, I am seeing a lot of very large-sized institutional money looking for a home. Some of this money is flowing into gold, and this is confusing technical traders who are battling what looks like a technically overbought gold market…”

So for new precious metals buyers, is it better to get in gradually, using the COT report and other indicators to help define entry points? Or should they ignore the squiggles, stop being cute and just fully commit on the assumption that whatever price they pay today will be dwarfed by what prevails when the system finally breaks down?

There isn’t, alas, a one-size-fits-all answer to such a question. So why bother discussing it? Because it’s interesting. And more information is always better than less.

via Zero Hedge http://ift.tt/1W128D5 Tyler Durden

In a stunningly honest and frank rant, FOX News' Judge Jeanine unleashes anchor hell upon Mitt Romney and the GOP establishment hordes.

She begins:

"There’s an insurrection coming. Mitt Romney just confirmed it. We’ve watched governors, the National Review, conservative leaders, establishment and party operatives trash Donald Trump. But Mitt Romney will always be remembered as the one who put us over the edge and awoke a sleeping giant, the Silent Majority, the American people.

 

Fact. The establishment is panicked. Mitt essentially called for a brokered convention where the Republican nominee will be decided by party activists and delegates irrespective of their state’s choice… You want a brokered convention? A primer Mitt. Whenever we have a brokered convention we lose.

 

Dewey and Ford emerged from a brokered convention to lose the general election. So why? Because the party elites and elders want to protect us and stop of from falling into the abyss?… Most of us working two or three jobs think we’re already in the abyss. The Obama abyss…

 

We are sick and tired of legislators of modest means who leave Congress multimillionaires, whose spouses and families get all the contracts from selling the post offices to accessing insider information so they can buy property and flip it. You’re so entrenched that you’re willing to give Hillary Clinton a win. It doesn’t matter to you which party, crony capitalism and its paradigm will not change for the elite."

And that is just the introduction… Grab a coffee (or something stronger) and watch…

via Zero Hedge http://ift.tt/1Qvn2Zz Tyler Durden

Submitted by Lance Roberts via RealInvestmentAdvice.com,

At the end of January, I discussed the potential for a reflexive rally in the markets and laid out three retracement levels at that time.

“The good news, if you want to call it that, is that the market is currently holding above the recent lows as short-term oversold conditions once again approach. It is critically important that the market holds above that support, which is also the neckline of the current “head and shoulders” formation, as a break would lead to a more substantive decline.”

Here is the same chart updated through Friday’s close:

I pointed out last week that:

“The good news is that the market was able to break above 1940, and the 50-dma, which now clears the way for a push to the 1970-1990 where the next levels of resistance will be found.“

The markets were not only able to push into the 1970-1990 level last week but also complete a 50% retracement from the recent lows as shown above.  The 8% advance from the closing lows just 4-weeks ago has sent “shorts” scrambling to cover pushing stock prices sharply higher.

But does this change any of the recent analysis?

I’M MISSING IT

“OMG!!! I am missing it. Don’t we need to be jumping back in?”

It is not surprising that the recent surge in the markets has awakened the “bullish spirits.” However, that is an emotionally based response to short-term market volatility rather than a decision to increase equity risk based on a defined and disciplined approach.

This goes to the heart of the portfolio management discipline and philosophy. The chart below shows the model allocation changes since 2013.

As you will note, portfolios have been grossly underweight equity related exposure since April of 2015 creating a positive performance gap between the index and the portfolio. That positive performance gap allows for a more relaxed approached to increasing portfolio allocations when the market re-establishes a positive price trend without sacrificing long-term performance.

The final reduction at the end of January protected portfolios from the decline in February, but has led to a minor performance drag over the last two weeks. But given that risk is still prevalent to the downside, I am willing to give up a potential “bear market rally” for the sake of protecting client capital from loss. 

As I have stated before, when the market re-establishes a positive trend, I will recommend putting preserved capital back to work. However, for such an equity increase to be warranted, the market will need to break the current declining price trend and work off some of the currently extreme overbought conditions. This is shown in the updated chart from last week.

There are quite a few moving pieces here, so let me explain.

• The shaded areas represent 2 and 3-standard deviations of price movement from the 125-day moving average. I am using a longer-term moving average here to represent more extreme price extensions of the index. The last 4-times prices were 3-standard deviations below the moving average, the subsequent rallies were very sharp as short positions were forced to cover. The vertical blue bars show the previous two periods where bulls regained footing and pushed markets from lows towards new highs. The current setup is indeed similar to those previous two attempts.
  
  

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• The top and bottom of the chart show the overbought/sold conditions of the market. The vertical dashed lines show that oversold conditions lead to fairly sharp rallies. The recent rally has responded as expected from recent oversold conditions. With the oversold condition now exhausted, the potential for further upside has been greatly reduced.
  
  

  ---

• With the 125-day moving average trading below the 150-dma, and with both averages declining rather than advancing, the easiest path for prices continues to be lower as downward resistance continues to be built. The arching dashed red line shows the change of overall advancing to now declining price trends. 

The last sentence above is the most important. The signal to increase equity related exposure in portfolios will require a breakout above the currently negative price trend. Until that happens, we remain confined in a “bear” market.

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TIME TO BUY OIL/ENERGY?

The short answer is “NO.”

Let me explain.

First, the rally in “oil prices” is a short-covering/extreme oversold move. While it “seems” like it has been a massive surge in the short term, as shown in the chart below, it barely registers on a longer-term basis. It is always important to keep some perspective.

The chart notes the dates of some of the calls I have been making in this missive since April 2014 when I recommended getting out of oil/energy entirely.

Notice that prior to 2014, the correlation between oil and energy prices was extremely correlated. The deviation I noted in 2014 is now in the process of being corrected, but is not complete as of yet. 

The decline in oil is not complete as of yet as there has been little progress in reverting the supply/demand imbalance. This will take several years to rectify and oil/energy prices will eventually settle into a trading range at these lower levels.

Again, for the sake of perspective, here is what happened to oil prices the last time supply and demand were this imbalanced.

As UBS recently explained:

“Yesterday oil ended in the green despite a very large reported crude inventory build, a reflection of how biased to the downside sentiment and positioning already is. Today, crude started in the red and has been mixed from there but moving higher. And both days, the stocks have led with energy the best performing sub-sector in the S&P.

 

Now, there is no doubt that the performance recently is TOTALLY short-squeeze led. Though it also shows how negative sentiment and positioning is.

WHAT HAS HELPED FUEL THIS SHORT SQUEEZE?

• Positioning and sentiment very biased to the short side/ underweight. And as we move up, the move is also exacerbated by short gamma positions that have to cover at higher levels.
• Despite high oil inventories (and still building), most upstream producers (from Exxon on down) have guided to lower than expected production as a result of lower CapEx.
• Ongoing hopes of a potential agreement between OPEC and non-OPEC members (seems unlikely but now a meeting set for March 20th is reviving some market hopes).
• Credit players covering equity shorts — evident today that “good credit names” are under-performing and “bad credit names” outperforming.“

As shown in the chart below, the number of outstanding contracts on oil is still well above the long-term mean suggesting that more unwinding needs to occur before a longer-term bottom in oil prices is made.

With energy-related stock prices once again at extremes, the next most probable move will be to the downside. This is particularly the case given the recent builds in inventories and a likely disappointment from OPEC/Saudi Arabia on March 20th.

Furthermore, the damage to energy company earnings will be accelerated as the last of hedges begin to roll off over the next couple of months. This realization will push energy stock prices lower as companies are re-evaluated for much lower profit margins and rising bankruptcy risk.

More layoffs are expected. As this occurs the negative impact to the Houston real estate market accelerate as homes fail to sell, apartment inventories rise and commercial buildings remain empty. But such will not be just a localized event but as further reductions in CapEx occur the ripple effect to the rest of the economy will grow. 

Note: If you don’t think housing is about to become a problem, again, this piece by Aaron Layman should give you a wake-up call as interest only mortgages are back. 

As Art Berman correctly stated in a recent interview:

“People think that the economy runs on money, but it runs on energy.” 

He also details in the interview how the current oil price collapse represents devaluation from over-investment in unconventional oil – and most commodities – because of cheap capital, and is simply a classic bubble.

“Continued oil prices of $30 per barrel or less are the only reasonable path to higher growth and a balanced oil market. I think we’re gonna get to $16.50/bbl. Normal is over, and there is no new normal yet.”

It is well worth listening to if you think we have reached a bottom in oil/energy prices.

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LOOKS LIKE A COUNTER-TREND RALLY

Eric Bush at Gavekal Research confirmed much of my own analysis on Friday suggesting that the current rally still has all of the earmarks of a bearish counter trend rally. To wit:

“The stocks with the lowest correlation to the dollar (and highest correlation to the yen and euro) have been the best performers over the past month. Today, we have come across another group of stocks that have been on a nice run that we think syncs up well with our analysis from yesterday and adds an additional signal that we are most likely in the midst of a counter-trend rally.

 

Late cyclical stocks tend to have a negative correlation to a stronger dollar. Consequently, given what we saw yesterday in our factor analysis we are not surprised that the two best performing industry groups over the past month in the developed world have been energy (12.1%) and materials (8%). These two industries have also been the worst performing (energy is down 27.8%) and the fourth worst performing (materials is down 14.1%) industry groups over the past year. Whenever the worst performing stocks start to outperform in the short-term, it starts to smell like a short covering rally. So it make senses that the most shorted stocks have also strongly outperformed the market over the past 4-6 weeks. In the first chart, we show a price series of the 50 most shorted stocks in the S&P 500. These stocks have had a nice V-shaped bounce and are at the highest level they have been at since early December. In the second chart, we show the performance of these 50 stocks compared to the S&P 500. Since January 20th, the most shorted stocks are over 15% higher while the S&P 500 has risen by a little less than 8%.”

“Given that we still haven’t seen a big enough expansion in 20-day new highs and that the best performing stocks over the past month, or so, have been those that have been beaten down the most over the previous year (and have had the most short interest), we believe we are in the midst of a counter-trend rally.

 

At this moment, the probability of more downside in the near term is probably greater than the probability that we have entered a new bullish phase.”

Eric is absolutely correct in his assessment. It is completely understandable that after sectors like energy, materials and industrials have had big declines that trying to bet on a bottom is enticing. However, that is the equivalent to “gambling without looking at your cards.” 

As I stated, since we have been underweight equity risk since last year, there is no need to try and “guess” if the markets have finally bottomed. We only need to wait for the markets to “show” us they have indeed fundamentally and technically turned the corner. At that point, regardless of what the “price” of the market is, the reward to risk ratio for increasing equity exposure in portfolios will be tilted heavily in our favor. Isn’t that what investing is really all about after all?

As Dick Russel once quipped:

“It’s better to be out of a bull market, than fully invested in a bear market.”

I will readily admit that the recent rally over the last couple of weeks has certainly had me second guessing myself. I am human after all and am subject to the evils of emotional bias just as anyone is.

It is in times like these that I must force myself to re-focus on my discipline and strategy to manage portfolio risk effectively. But this does not mean that current analysis cannot be wrong. The financial markets are dynamic and evolving organisms. Events occur that impact markets in an unexpected manner. Therefore, analysis must also be dynamic and evolving in order to remain relevant. The shorter the time frame, the greater the impact the change in market dynamics will have on the accuracy of the analysis. This is why I tend to remain focused on weekly, monthly and quarterly data where evolutions in the markets have a much slower pace of impact to the accuracy of the analysis. 

For example, earnings, which are announced quarterly, are one of the most important drivers of future stock market returns. I have addressed recently the ongoing deterioration in earnings and profits currently.

The importance of this cannot be dismissed. Since 1900, there have been 27 instances of EPS declines over a 2-quarter period. Historically speaking, such a rate of decline has coincided with a recession 81% of the time. The remaining 19% of the time, earnings re-accelerated for a short period due to short-term stimulus (either fiscal or monetary) which only temporarily delayed the onset of a recession. 

The chart below shows the long-term history of earnings growth and the cyclical nature of earnings from 6% peak-to-peak growth to 5% trough-to-trough reversions. (I have provided where Goldman Sachs and Raymond James had predicted earnings to grow from 2014-2020 versus where we are currently.

“Missed It By That Much.” – Maxwell Smart, Get Smart

The next chart shows the current deviation in earnings growth from the long-term trend. Note that negative deviations have coincided with major market peaks.

Lastly, the technical chart below shows earnings capped at the “prior peak” of earnings growth as compared to the S&P 500. Future outcomes have not been kind.

The point here is that while markets have bounced as of late, a major underpinning of future stock prices is still negative. Until a change to the positive begins to occur, the probability of lower prices continues to outweigh the possibility of higher ones.

Therefore, we continue to wait.

 

via Zero Hedge http://ift.tt/1U4Hseg Tyler Durden

It’s probably safe to say that most central bankers aren’t particularly enamored with the idea that post-crisis monetary policy has contributed to rising income inequality.

Take Ben Bernanke for instance, who took a few moments away from advising Citadel and PIMCO last year to throw on his blogger Ben hat and explain why he and his “courage” aren’t responsible for the widening gap between the rich and the poor.

“First, widening inequality is a very long-term trend, one that has been decades in the making,” he explained. “The degree of inequality we see today is primarily the result of deep structural changes in our economy that have taken place over many years, [and by] comparison, the effects of monetary policy on inequality are almost certainly modest and transient,” he added.

Right. So basically, poor people have been getting poorer for a long time and to the extent that monetary policy contributes to the wealth gap, that contribution is minimal at best.

Others of Bernanke’s vaunted ilk also dispute the notion that wealth inequality has anything at all to do with official policy. Of course to deny ZIRP and QE have driven an even larger wedge between the haves and the have nots than existed in the past is absurd. Post-crisis policy was (and still is) specifically designed to drive up the prices of the assets (financial assets that is) that are most concentrated in the hands of the wealthy. And make no mistake, these policies have been very good at doing just that – blowing bubbles in everything from stocks, to fixed income, to Modiglianis. In other words, if you are deliberately making these assets more expensive and you know that they are disproportionately held by the wealthy, how can you deny you’re increasingly the wealth gap?

For some reason (and we say that sarcastically), most of this “wealth” just hasn’t managed to “trickle down” to the common folk. As it turns out, the benefits of cheap liquidity simply don’t accrue to “everyday” people like they do to the rich and because QE was also a miserable failure at juicing aggregate demand, the rich simply watched as their paper wealth grew in tandem with asset prices while the poor watched as they, well, just got poorer by comparison.

In any event, the BIS, in their latest quarterly report, is out with a look at “wealth inequality and monetary policy,” and we should caution that while the bank offers quite a few ways to look at the issue that are worth considering (read the full report here), the following graphics are about as unequivocal as one could possibly hope to find.

Change in inequality is equal to the difference in the growth rate of net wealth between the fifth and second quartiles. Simple instructions: 1) spot 2008, 2) watch the red line head “up and to the right.” 

France                           Germany                      Italy

United States

But don’t worry, we’re sure this is, as Ben says, “…modest and transient.”

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

Submitted by Jack Salmon via The Foundation for Economic Education,

A new report from JP Morgan Chase & Co. finds that the summer employment rate for teenagers is nearing a record low at 34 percent. The report surveyed 15 US cities and found that despite an increase in summer positions available over a two year period, only 38 percent of teens and young adults found summer jobs.

This would be worrying by itself given the importance of work experience in entry-level career development, but it is also part of a long-term trend. Since 1995 the rate of seasonal teenage employment has declined by over a third from around 55 percent to 34 percent in 2015. The report does not attempt to examine why summer youth employment has fallen over the past two decades. If it had, it would probably find one answer in the minimum wage.  

Most of the 15 cities studied in this report have minimum wage rates above the federal level, with cities such as Seattle having a rate more than double that. Recent data from the Bureau of Labor Statistics seen in the chart show exactly how a drastic rise in the minimum wage rate affects the rate of employment.

Seattle has experienced the largest 3 month job loss in its history last year, following the introduction of a $15 minimum wage. We can only imagine the impact such a change has had on the prospects of employment for the young and unskilled.

Raising the minimum wage reduces the number of jobs in the long-run. It is difficult to measure this long-run effect in terms of the numbers of never materializing jobs. However, the key mechanism behind the model—that more labor-intensive establishments are replaced by more capital-intensive ones—is supported by evidence. That is why recent research suggesting that minimum wages barely reduce the number of jobs in the short-run, should be taken with caution. Several years down the line, a higher real minimum wage can lead to much larger employment losses.

Nevertheless, politicians continue to push the idea that minimum wage laws are somehow helping the young “earn a decent wage.” It is important to remember the underlying motives behind pushes for higher minimum wage rates. Milton Friedman characterized it as an “unholy coalition of do-gooders on the one hand and special interests on the other; special interests being the trade unions.”

Several empirical studies have been conducted over the course of more than two decades, with all evidence pointing toward negative effects of minimum wage rises on employment levels among the young and unskilled. A study conducted by David Neumark and William Wascher in 1995 noted that “such increases raise the probability that more-skilled teenagers leave school and displace lower-skilled workers from their jobs. These findings are consistent with the predictions of a competitive labor market model that recognizes skill differences among workers. In addition, we find that the displaced lower-skilled workers are more likely to end up non-enrolled and non-employed.”

Policy makers who continuously raise the minimum wage simply assure that those young people, whose skills are not sufficient to justify that kind of wage, will instead remain unemployed. In an interview, Friedman famously asked “What do you call a person whose labor is worth less than the minimum wage? Permanently unemployed.”

The upshot: Raising the minimum wage at both federal and local levels denies youth the skills and experience they need to get their career going.

via Zero Hedge http://ift.tt/24JQDFY Tyler Durden

It never ceases to amaze (and amuse) us how much time big bank “economists” and “strategists” spend on Zero Hedge – even though we have never compensated said banks either directly or with soft dollars – instead of doing research, or spending time with their paying clients.

Just one week ago, it was CitiFX’s Brent Donnelly who was “critical” why the financial media is, supposedly, “highlights bearish stories” (perhaps has has missed the past 8 years of CNBC “reporting”, we don’t know). This is what he said:

trade of the year” which we presented on February 12, and which returned 30% in just two days was to go long Chesapeake bonds – but are observations always backed by facts, virtually all of which have to do with documenting and narrating the plight of an overhyped recovery which never took place (something which incidentally the following slide from, uh… Citi, shows)

 

 

 

As for whether Mr. Donn>Give the people what they want

 

In an email I sent Monday, I was critical of the financial media for highlighting bearish stories but ignoring bullish ones. I was thinking about this and realized that maybe you can’t blame the commentators… People just gravitate towards bad news—humans are much more interested in watching a car crash or shooting on TV than a feel-good story. 

 

I looked at Google searches related to the stock market. The results (Chart1) speak for themselves. My conclusion is that it’s not fair to blame Zerohedge and friends for the permabear newsflow… They’re just giving the people what they want!

 

 

To which we had a simple, and logical, response:

What people want is not bearish news, what they want is the truth, something they, for whatever reason, feel they can’t get from the mainstream media, which in turn has opened up opportunities to alternative media outlets such as “Zerohedge and friends.” Incidentally, these outlets are not only not permabears – we remind Mr. Donnelly that our “permabearishly enough “Don’t look down – You might find too many negatives” and which we summarized in the following post:  “Citi: we have a problem.”

As for the question whether Zero Hedge traffic correlates with market volatility, we would like to help Brent and everyone else who would rater extrapolate rather than use actual data, with the following self-explanatory chart.

 

* * *

And just as we though that bankers had learned their lesson and gone back to actually doing what they are paid to do – i.e., forecasting the future instead of reading blogs, yesterday we found that that was not the case.

In a note released on Saturday, Jefferies’ Thomas “TJ” Thornton, wrote the following epic trolling of Zero Hedge by invoking none other than Donald Trump:

US – “Lightweights like Zero Hedge might point to a sub-50 ISM as another reason to hate equities, but there’s a reason why little ZH is a choker, a reason he’s got one of the worst records in predicting markets anywhere, just a harrable record, harrable, I mean, successful people have pointed out that he’s 0 for 2600. He’s succeeded at being wrong. Success is my son-in-law, I’m successful, my daughter is both beautiful and successful. I have many successful friends.” Made up quote, but the point is that it’s hard to be successful when just reacting to backward looking information. Our work suggests that by the time the ISM breaks 50 to the downside the market is already pricing in much of the concern–actually a break through 50 to the downside tends to be quite positive for the market over the next 12M even when you include recessionary periods. When that break of 50 hasn’t been associated with an immediate recession (i.e. perhaps now), median market performance is up 11% over the next 6M, and 21% over the next 12M. This week we got a better than expected ISM, and skeptics point to the fact that it’s still below 50, but that may be a positive.  See supporting chart, table and methodology below. (T.J. Thornton, US Product Management).

We are curious just what the explanation of “0 for 2600” means, since those who actually read the articles instead of regurgitating what they read about it on Twitter, know that “little ZH” does not make forecasts or predictions, as our recurring annual year end piece very clearly notes, to wit:

With all that behind us, what is in store for 2016? We don’t know: as frequent and not so frequent readers know, we do not pretend to be able to predict the future and we don’t try (despite endless allegations that we constantly predict the collapse of everything): we leave the predicting to the “smartest people in the room” who year after year have been dead wrong. We merely observe and try to find what is entertaining, amusing, surprising or grotesque in an increasingly sad world.

In other words, we are merely a data-conveying messenger, one which increasingly more banks feel obligated to shoot for some unknown reason, although to be honest we are grateful for the constant advertising. We couldn’t hit record traffic in February with a zero advertising budget if it wasn’t for their tireless efforts to namedrop.

We do know, however, who Jefferies is: for years CEO Dick Handler has been scrambling to create something more than just a middle-market broker whose bread and butter have been two things: trading and underwriting junk bonds for small and medium companies (B2/B with an EBITDA of $50MM or less is the sweetspot), and hiring recently fired UBS and other bulge bracket bankers in hopes of getting over its perpetual chip on its shoulder. Bankers such as disgraced ex-UBS healthcare banker Sage Kelly who was recently described as a “bed-pooping, cokehead.” He was promptly terminated after details of how senior Jefferies bankers allegedly attract new business, namely cocaine binges interspersed with forced group sex. 

Dick failed.

Jefferies, or Jeffries as it is known in all offering memos before the bank has to spend tens of thousands in hourly lawyer fees to correct the bank’s official name, is also the place where novelty economists are hired to make loud noises and write hypnotically stupid sentences just to attract attention and stand out above the crowd. Case in point – the junk bond-focused bank’s “chief market strategist” shown below in a recent Bloomberg interview wearing his “I Heart QE” hat.

Typical Wall Street economist: betting it all on central bank bailouts for 2600 days running http://pic.twitter.com/knCOTCsDve

— zerohedge (@zerohedge) February 21, 2016

That said, going back to Jefferies masterful trollery of Zero Hedge, we promptly responded with a question of our own: a tweet showcasing Jefferies revenue success in its most important group: fixed income, which to be honest was at least positive in Q4. That’s more than Jefferies can say about its Q3 fixed income results when revenue was, drumroll, negative.

Visualizing Jefferies’ “success” http://pic.twitter.com/0fbPHEqXRg

— zerohedge (@zerohedge) March 5, 2016

Oddly enough, it was these same Jefferies strategists who were supposed to react to forward looking information in 2015 when instead their lack of “vision” resulted in the worst quarter in recent Jefferies history. This is what Jefferies CEO Dick Handler said in mid-December:

“Fixed Income, which has been a solid to excellent business for Jefferies in prior years, did not perform well in 2015. Almost all our Fixed Income credit businesses were impacted by the prolonged anticipation of the lift-off in Federal Reserve rate-setting, the collapse in the global energy markets (where we have long been an active adviser, capital raiser and trader), reduced originations in leveraged finance and meaningfully reduced liquidity. There were a number of periods of extreme volatility, which were followed by periods of low trading volume.”

He hopefully added that “with our exposures in distressed securities reduced to current levels, there should be no similar impact on our future results.”

Wait, isn’t it the job of Jefferies’ crack economists to look at “forward looking information” and make appropriate adjustments before the bank is slaughtered with its two worst trading quarters in years? It almost appears as if “TJ” was too busy reading Zero Hedge in 2015 than actually advising his boss to dump those billions in junk bonds Jefferies carried on its balance sheet and which led to “TJ” having a “junk” bonus to go with his forecasting effort.

And to think there were those who predicted, looking at “forward looking information” that with its purchase of Jefferies, the “mini Berkshire’ known as Leucadia would promptly soar in value. Using “backward looking data” that appears not to have happened.

 

But the moment of crystal-shattering poetic justice came just hours after “TJ” trolled “lightweight choker Zero Hedge” for being too negative when Reuters reported that…

More details from Reuters:

Jefferies Group LLC will merge its junk-rated loans and bonds business with the junk debt unit of its joint venture with MassMutual Financial Group, according to people familiar with the matter, in the biggest reorganization by a U.S. investment bank since the leveraged finance markets seized up last year. As a result, Kevin Lockhart, global head of leveraged finance, and Adam Sokoloff, global head of sponsors, have left Jefferies, the sources said, asking not to be identified as the moves have not been announced.

 

Banks have had trouble selling debt related to leveraged buyouts since late last year. Junk bond markets seized up on concerns about the prospect of higher interest rates, the health of the U.S. economy, and how those two factors would affect companies with the shakiest financial footing.

 

According to the people familiar with the matter, Jefferies’ leveraged finance business will be combined with the junk debt origination team of Jefferies Finance LLC, the joint venture between Jefferies and U.S. life insurer MassMutual.

The punchline: “Jefferies’ management presented the changes internally as a way to boost efficiency and focus on clients, rather than a response to troubled deals, the sources said. It was not immediately clear if the combination would offer Jefferies more financial resources to increase lending.“

Translation: the question is whether Jefferies “forward looking”Q1 fixed income revenues will be positive or will revert to negative for the second quarter in three.

We could continue but frankly we are starting to feel bad writing about the troubles facing the mid-tier junk bond underwriter.

As for whether a “backward looking” sub-50 PMI is irrelevant, we will let “TJ” ask his just fired former co-workers if it suggests the worst is behind us, no matter how one looks at it…

via Zero Hedge http://ift.tt/1W0DnH0 Tyler Durden