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The text that follows may be the best summary of what has happened on Wall Street – both forensically and philosophical – over the past 7 years, explaining how central banks broke the “market”, and why traders, investors, regulators, policy makers, and everyone else suddenly has no idea either what is going on or what to do next. Not surprisingly, it comes from Deutsche Bank, which this week has been staring at the corpe of Lehman Brothers and wondering if it is next…

From DB’s Aleksandar Kocic

Asphyxiation — code orange?

We believe for the past few weeks we’ve been experiencing an accelerated reaction to a policy mix that caused a general shift in perception of risk from isolated idiosyncratic flare-ups to pseudo systemic. The mix is defined by seven years of unprecedented liquidity injection with low rates and record low volatility on one side, and bank regulation with diminished capacity of the market to extend liquidity on the other.

The first effect alone has three major consequences. Low rates had been making UST investments unattractive (expensive). So, investors sought yield elsewhere. This is where low volatility played the role. Portfolio managers adjust their position on the mean-variance frontier by matching their risk limits to a particular return. Extinguishing volatility pushes them towards riskier assets without a need to change their risk limits. This was ok as long as volatility remained low. Instead of investing in UST, duration players moved across the credit line into IG, HY, etc., which offered higher yield and superior carry. In these markets carry becomes the main theme and everyone who refuses to play that game is punished by high negative carry. This was stimulating for risk, and risk assets outperformed in low rates and low volatility environment. Correlations between risk assets and yields changed sign, but nobody complained because both stocks and bonds rallied.

Negative carry of any contrarian position was punitive which resulted in massive one-sided positioning. The problems began with the start of stimulus unwind as all of its underlying aspects began to reinforce each other and regulatory environment amplifies their effect.

There is a huge overweight in relatively illiquid assets. While positioning grew, regulation has significantly diminished dealers’ capacity to absorb those unwinds, which would have been difficult even without the regulatory restrictions. Volatility is on the rise and even those positions that used to look a safe are appearing increasingly risky forcing additional need for their unwind. So, with reduced of liquidity, investors have to get out of healthy, well-performing/non-problematic assets in order to cover MTM losses and possible costs of redemptions. The legacy of 2015 which was a difficult year with massive wave of redemptions only exacerbated the situations resulting in low tolerance for risk, while failure of large class of standard economic models and loss of forecasting power resulted in low confidence across the board.

The effects of policy unwind and liquidity dislocations are accelerated by the currency play in Asia. While alone this creates a problem, rate hikes and a strong USD makes it more difficult for the EM measures to be effective and creates another reinforcing loop. Problems in any market sector have a potential to create contagion.

The markets are not insulated from each other but are coupled in a “destructive” way, a mirror image of QE dynamics. Risks are becoming unpinpointable. Problems are global while politics remains inherently local allowing the existing trends to remain unchecked and self-reinforce. Any action causes further problems, which creates a quicksand effect — everyone is both a victim and an accomplice.

via Zero Hedge http://ift.tt/1TivU8b Tyler Durden

Authored by Ludwig von Mises via The Mises Institute,

[This article is excerpted from Socialism: An Economic and Sociological Analysis]

It is a mistake to think that the lack of success of experiments in Socialism that have been made can help to overcome Socialism. Facts per se can neither prove nor refute anything. Everything is decided by the interpretation and explanation of the facts, by the ideas and the theories.

The man who clings to Socialism will continue to ascribe all the world's evil to private property and to expect salvation from Socialism. Socialists ascribe the failures of Russian Bolshevism to every circumstance except the inadequacy of the system. From the socialist point of view, Capitalism alone is responsible for all the misery the world has had to endure in recent years. Socialists see only what they want to see and are blind to anything that might contradict their theory.

Only ideas can overcome ideas and it is only the ideas of Capitalism and of [Classical] Liberalism that can overcome Socialism. Only by a battle of ideas can a decision be reached.

Liberalism and Capitalism address themselves to the cool, well-balanced mind. They proceed by strict logic, eliminating any appeal to the emotions. Socialism, on the contrary, works on the emotions, tries to violate logical considerations by rousing a sense of personal interest and to stifle the voice of reason by awakening primitive instincts.

Even with those of intellectually higher standing, with the few capable of independent reflection, this seems to give Socialism an advantage. With the others, the great masses who are unable to think, the Socialist position is considered unshakable. A speaker who inflames the passions of the masses is supposed to have a better chance of success than one who appeals to their reason. Thus the prospects of Liberalism in the fight with Socialism are accounted very poor.

This pessimistic point of view is completely mistaken in its estimate of the influence which rational and quiet reflection can exercise on the masses. It also exaggerates enormously the importance of the part played by the masses, and consequently mass-psychological elements, in creating and forming the predominant ideas of an epoch.

It is true that the masses do not think. But just for this reason they follow those who do think. The intellectual guidance of humanity belongs to the very few who think for themselves. At first they influence the circle of those capable of grasping and understanding what others have thought; through these intermediaries their ideas reach the masses and there condense themselves into the public opinion of the time. Socialism has not become the ruling idea of our period because the masses first thought out the idea of the socialization of the means of production and then transmitted it to the intellectually higher classes. Even the materialistic conception of history, haunted as it is by "the psyche of the people" as conceived by Romanticism and the historical school of jurisprudence does not risk such an assertion. Of itself the mass psyche has never produced anything but mass crime, devastation, and destruction. Admittedly the idea of Socialism is also in its effects nothing more than destruction, but it is nevertheless an idea. It had to be thought out, and this could only be the work of individual thinkers. Like every other great thought, it has penetrated to the masses only through the intellectual middle class. Neither the people nor the masses were the first socialists. Even today they are agrarian socialist and syndicalist rather than socialist.

The first socialists were the intellectuals; they and not the masses are the backbone of Socialism. The power of Socialism too, is like any other power ultimately spiritual; and it finds its support in ideas proceeding from the intellectual leaders, who give them to the people. If the intelligentsia abandoned Socialism its power would end. In the long run the masses cannot withstand the ideas of the leaders. True, individual demagogues may be ready, for the sake of a career and against their better knowledge, to instil into the people ideas which flatter their baser instincts and which are therefore sure to be well received. But in the end, prophets who in their heart know themselves to be false cannot prevail against those filled with the power of sincere conviction. Nothing can corrupt ideas. Neither by money nor by other rewards can one hire men for the fight against ideas.

Human society is an issue of the mind. Social co-operation must first be conceived, then willed, then realized in action. It is ideas that make history, not the "material productive forces," those nebulous and mystical schemata of the materialist conception of history. If we could overcome the idea of Socialism, if humanity could be brought to recognize the social necessity of private ownership in the means of production, then Socialism would have to leave the stage. That is the only thing that counts.

The victory of the socialist idea over the Liberal idea has only come about through the displacement of the social attitude, which has regard to the social function of the single institution and the total effect of the whole social apparatus, by an anti-social attitude, which considers the individual parts of the social mechanism as detached units. Socialism sees the individuals–the hungry, the unemployed, and the rich—and finds fault on that account; Liberalism never forgets the whole and the interdependence of every phenomenon. It knows well enough that private ownership in the means of production is not able to transform the world into a paradise; it has never tried to establish anything beyond the simple fact that the socialist order of society is unrealizable, and therefore less able than Capitalism to promote the well-being of all.

No one has understood Liberalism less than those who have joined its ranks during the recent decades. They have felt themselves obliged to fight excrescences of Capitalism, thereby taking over without a qualm the characteristic anti-social attitude of the socialists. A social order has no excrescences which can be cut off at will. If a phenomenon results inevitably from a social system based on private ownership in the means of production, no ethical or aesthetic caprice can condemn it. Speculation, for example, which is inherent in all economic action, in a socialistic society as well as any other, cannot be condemned for the form it takes under Capitalism merely because the censor of morals mistakes its social function. Nor have these disciples of Liberalism been any more fortunate in their criticisms of Socialism. They have constantly declared that Socialism is a beautiful and noble ideal towards which one ought to strive were it realizable, but that, alas, it could not be so, because it presupposed human beings more perfect morally than those with whom we have to deal. It is difficult to see how people can decide that Socialism is in any way better than Capitalism unless they can maintain that it functions better as a social system. With the same justification it might be said that a machine constructed on the basis of perpetual motion would be better than one worked according to the given laws of mechanics—if only it could be made to function reliably. If the concept of Socialism contains an error which prevents that system from doing what it is supposed to do, then Socialism cannot be compared with the Capitalist system, for this has proved itself workable. Neither can it be called nobler, more beautiful or more just.

It is true, Socialism cannot be realized, but it is not because it calls for sublime and altruistic beings. One of the things this book set out to prove was that the socialist commonwealth lacks above all one quality which is indispensable for every economic system which does not live from hand to mouth but works with indirect and roundabout methods of production: that is the ability to calculate, and therefore to proceed rationally. Once this has been generally recognized, all socialist ideas must vanish from the minds of reasonable human beings.

How untenable is the opinion that Socialism must come because social evolution necessarily leads to it, has been shown in earlier sections of this book. The world inclines to Socialism because the great majority of people want it. They want it because they believe that Socialism will guarantee a higher standard of welfare. The loss of this conviction would signify the end of Socialism.

via Zero Hedge http://ift.tt/1QekA6j Tyler Durden

There are three important observations in the latest “Things We’ve Learned This Week” weekly report from Credit Suisse’s James Wicklund. 

The first, is that anyone holding out for a big push higher across energy equities as a result of a wave of distressed equity M&A can give up: according to Credit Suisse the next wave of mergers will take place via “debt negotiations”, not equity buyout offers: “the best M&A will be done on the credit side, not the equity side.” This means that instead of stock prices rising, they will collapse as companies engage in corporate reorgs, ones where the debt is impaired partially, and by definition, the equity fully.

The second is that the Dallas Fed was lying when it said our story about the Dallas Fed forcing energy lenders to delay counterparty bankruptcies as long as possible was untrue. This is what Credit Suisse just said:

Give and take between the Comptroller of the Currency and the Fed generated stories of big banks being a bit more lenient rather than swamping regional banks with failures. E&P companies had their borrowing bases upheld, for now, but were told to generate additional liquidity or have those bases cut in the spring

Precisely as we said; it also explains the significant delay in the announcement of Chapter 11 (and 7) filings from the shale patch. It also explains the surge in companies reducing or outright cutting dividends.

But not even these attempts to dramatically conserve liquidity are giving the lender banks much comfort, because as Wicklung says:

while your borrowing base might be upheld, there will be minimum liquidity requirements before capital can be accessed. It is hitting the OFS sector as well. As one banker put it, “we are looking to save ourselves now,” with banks selling company debt for as low as $0.10 on the dollar on companies that only had a 50-75% borrow rates to start.

Wicklund’s full note:

Yikes. We had some interesting conversations with a few friends this week who were swapping “war stories” about the current market. The stories demonstrate the view that acquisitions will be done through debt negotiations, not equity buyout offers. In the E&P space, many banks admit to giving their customers a bit of a pass during fall redeterminations. That was then, this is now. Give and take between the Comptroller of the Currency and the Fed generated stories of big banks being a bit more lenient rather than swamping regional banks with failures. E&P companies had their borrowing bases upheld, for now, but were told to generate additional liquidity or have those bases cut in the spring. The second part was not lost on company boards of directors who have pressured managements to dramatically reduce capex. Now, while your borrowing base might be upheld, there will be minimum liquidity requirements before capital can be accessed. It is hitting the OFS sector as well. As one banker put it, “we are looking to save ourselves now,” with banks selling company debt for as low as $0.10 on the dollar on companies that only had a 50-75% borrow rates to start. That pushes the value to $0.05-0.075 to the dollar. Buying the debt at a significant discount and getting the banks to accept a haircut, rather than going through an expensive bankruptcy process that generates the same results, is the conventional wisdom. That means the best M&A will be done on the credit side, not the equity side. As one friend put it, we just have to find the “nuclear cockroaches” that will survive. Ugly.

For now, however, everyone is delaying the inevitable moment of “credit side M&A” (which is a euphemism for prepack reorganizations), in fading hopes oil will somehow surge and be the proverbial deus ex for the sector. It won’t arrive, at which point the “nuclear cockroaches” will finally start emerging.

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

 

Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

As we’ve been warning, this market is extremely vulnerable. Watch out.

Leftist war-harpy Hillary Clinton – the candidate of the country’s assembled cronies and zombies, in short, the prototypical Deep State representative. We feel reminded of an aged Cersei Lannister every time we contemplate Ms.“best cattle futures trader in the world” (more). Whatever you do America, please refrain from making this harridan your president. Nothing could possibly be worse. Luckily, even syphilis is more popular than Hillary among young voters. This fills us with hope.

 

Meanwhile… who’s the crony? Democrat front-runner Hillary Clinton is the Deep State’s top choice for president.  She has already received $21 million from Wall Street for her campaign. That’s 280 times more than Bernie Sanders.

This is why Sanders and Donald Trump are doing so well in the polls. People are catching on to how the system works. They know they are being taken for fools. According to a recent CNN poll, 69% of Americans are either “very angry” or “somewhat angry” about “the way things are going” in the U.S.

And according to a recent NBC/Wall Street Journal poll, the same percentage – 69% – are angry because the U.S. political system “seems to only be working for the insiders with money and power, like those on Wall Street or in Washington.” Among young voters, according to a well-watched video, “syphilis is more popular than Hillary.”

But Clinton is the crony favorite, supported by Wall Street and the Pentagon. In the old days, the conservatives believed the U.S. government was the devil at home and an angel abroad. The liberals believed the government was an angel at home and a devil overseas. Hillary believes that government always wears wings – at home and abroad.

 

Hillary Clinton: welfare/warfare statist par excellence.

 

The Rise of the Outsiders

The young and the plain folk know it isn’t so. They put on uniforms. They salute the flag. They do their military service. They pay their taxes. But they know something is wrong.

They don’t necessarily understand how the system works. But they know it is rigged against them. So, they turn to outsiders Trump and Sanders. The Washington Examiner reports:

“In a nearly one-hour speech, Trump railed against pharmaceutical companies. He railed against oil companies. And insurance companies. And defense contractors. And he set himself against a political system that he said allows big-money corporate “bloodsuckers” to control the government with campaign contributions.

 

“Whether it’s the insurance companies, or the drug companies, or the oil companies, it’s all the same thing,” Trump said. “We’re never going to get our country back if we keep doing this.”

 

Bernie and the Donald – you only have to follow mainstream media reportage on these two to realize that they are positively scaring the cr*p out of the establishment. Yes, many of their policies are absolutely hair-raising nonsense…but both also have a handful of praiseworthy ideas, which incidentally are precisely the kind of things that are held to be “beyond debate” by the ruling crony elite.

 

As former Washington insider turned Deep State whistleblower Mike Lofgren put it in the January issue of Bonner & Partners Investor Network:

“What Trump and Sanders have in common is they are not your typical politicians. And don’t think that doesn’t scare the daylights out of the political establishment.”

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

Long before the saying “BTFD” emerged on Wall Street as a result of some $13 trillion in central bank liquidity injections (now rapidly unwinding as a result of the failure off the Petrodollar and the so-called Quantitative Tightening) which made corrections impossible if not yet illegal, the phenomenon of buying sharply falling stocks had a different name on Wall Street: “catching a falling knife” (alternatively “dash for trash”).

And yet, absent a functioning global central bank does it pay to catch falling knives? That is the topic of the latest analysis by SocGen’s Andrew Laphtorne, whose conclusion is bound to disappoint thousands of 20-year-old hedge fund managers whose only “edge” is to buy whatever is most red on any daily heatmap.

But before we get to the conclusion, a quick look at this fascination with “catching bottoms.” As Lapthorne writes, in the retail industry “there is a whole sphere of psychological research dedicated to exploiting our fondness for a bargain. From overpricing items to begin with, only then to discount them, to placing them next to more expensive assets, to bundling items together to give the impression you are getting more for less. ‘Black Friday sales’ type events are essentially there to exploit our weakness for an apparent bargain, to the extent that the thrill of getting a bargain is emotionally more important than the actual pleasure you derive from the underlying item itself. Steep price declines in equities markets can create such emotions.”

According to Wikipedia, anchoring is “the tendency to rely too heavily, or “anchor”, on one trait or piece of information when making decisions (usually the first piece of information that we acquire on that subject),” and in the world of investing that piece of information tends to be price. So just as a bargain hunter in a sale will see “value” if the sale price is significantly different to the pre-sale price, so investors will get excited about big price declines relative to recent history. This effect has profound effects. Witness the near 25% bounce in UK Mining stocks in the last few days. When faced with an index that has fallen some 60% in the space of a year, you can’t help thinking of the potential 150% upside to the old price. We’ve all done it. Maybe it was gold, or biotech stocks, or Apple… It’s in our DNA.

 

So faced with a whole bunch of stocks trading significantly down from their highs, many investors will sense an opportunity to pick up bargain. But as investors our job should then be to try to curb that instinct and seek alternative and more useful information. An obvious starting point, which we aim to address here, is to ask the simple question: does it make sense to buy stocks simply because they have fallen a lot.

Lapthorne then analyzed the performance of buying “falling knive” portfolios over time. This is what he found.

We start our analysis with a simple exercise, where we look at the relative performance of a strategy that buys companies that have seen 1) 20%, 2) 30%, 3) 40% and 4) 50% declines from their 12-month peak. As our portfolios might only include a handful of companies in some periods, we only take into account periods where we have at least 20 companies, and otherwise we assume a zero return. All portfolios are then rebalanced on a monthly basis, and our universe is based on FTSE World stocks since 1990.

 

As the chart below shows, despite some periods of strong outperformance (these periods are often referred to as the “dash to trash”), all portfolios eventually underperformed the market.

 

 

Maybe the performance better over longer holding periods? Again, No.

We also wanted to look at the performance of the different portfolios across longer holding periods as you might think that given the price declines these stocks have seen, it will take a longer time period for them to recover. Still we find relative performance to be consistently negative for the longer holding periods as well. The chart below shows holding periods up to 1yr, and we have actually looked at even longer periods and observed a very similar pattern.

 

 

Another thing we checked is each stock’s performance relative to their sector and country as often distress is associated with particular countries or sectors and hence our portfolios historically will probably see heavy biases versus the universe portfolio (for example energy stocks today). So, it could be argued that while distress stocks show poor performance versus the market, they fare better versus their country or sector peers. This seems not to be the case, for while we see some improvement in the relative performance, it still remains negative across all the holding periods.

 

 

According to the SocGen strategist, when markets move downwards, i.e., when there is a broad selloff, the “falling knives” portfolio sees even worse performance with an excess return of ~-17% and a hit ratio (i.e. percentage of periods that the has outperformed the market) of close to 0% on a forward 1-year basis. Perhaps more surprising is the performance of SocGen’s portfolio in up-markets, where one would expect the portfolio to perform better and produce strong relative performance. Instead, while overall the excess performance is positive, it is only by less than 2% with hit ratios of around ~50%.

In summary, according to Lapthorne, “it is obvious that the upside versus downside payoff of ‘falling knives’ is not very enticing for even the bravest investors. There is a significant penalty to pay in case you get the timing wrong and the actual upside is very limited.”

So is all lost for BTFDers? There is one exception: while it doesn’t pay to buy falling knives, as “rarely do those stocks that lead us down into a slump provide the best performances on the  return back up, and as such investing in ‘falling knives’ is a bad idea”, this strategy does seem to work in one specific case: if one ties this performance to the absolute proportion of beaten up stocks within the market in any given month. “That is to say if the whole market is cheap, the strategy seems to work.” Also “if we select and buy the cheapest stocks in valuation terms within this universe, the strategy also works. So it would appear that bargain hunting can work, just make sure the share price is not your only guide.”

So the last question: is the market cheap enough to where buying falling knives could potentially work? Lapthorne one final time:

Despite last month declines, valuation dispersion has been so depressed in recent years that it still sits slightly below average on a global basis. It has risen quite fast recently but the current level still does not look very attractive, particularly given where the absolute level of equity valuations remain today and the deteriorating global macro environment

Dip buyers: you have been warned.

via Zero Hedge http://ift.tt/1TZm8Y2 Tyler Durden

Submitted by Jeffrey Snider via Alhambra Investment Partners,

Everyone knows the Titanic sank in April 1912, and if they didn’t they were reminded only a few years ago at its centennial. Less well known, for good reason, is the novel Futility, written by Morgan Robertson in 1898 years before Titanic had even been conceived. Robertson’s book includes the largest vessel ever constructed and he even offered it the name “Titan.” And much like the real Titanic, Titan carries only about half the lifeboats necessary for all the souls onboard and even strikes an iceberg in the Atlantic closing in on Newfoundland.

The physical descriptions of the ship in the novel were eerily close to what Titanic would eventually become; including a capacity for 3,000 passengers and crew, the configuration of the masts and even the propellers. To some, Robertson was a visionary if not a prophet. The legend survives to this day because of those similarities.

It is not well-known beyond the committed because the similarities end there. And even the seeming connections are not all that fantastic to begin with; in 1898 large ships were attaining that configuration and size, Robertson merely imagined what the next steps might be. Further, the route through the North Atlantic was just common and icebergs a quite familiar hazard especially at night (both Titan and Titanic met their fate around midnight).

Thinking the novel some kind of wizardry on the part of Morgan Robertson is an example of the Texas Sharpshooter fallacy. In this specific case, observation has proved that view correct as Robertson does not ever again appear in the same visionary capacity.

The name of the fallacy is reportedly traced to epidemiologist Dr. Seymour Grufferman in debunking cancer clusters. There are various versions of the story, but one of the earliest appeared in a newspaper in Arizona in October 1982:

I once read a story of an army sharpshooter who visited a small town. He was amazed to find targets drawn on trees, walls, fences and barns. Even more fascinating was the fact that each target had a bullet hole in the exact center of its bull’s eye.

 

Inquiring about this, he had the honor of meeting the remarkable marksman. “I’ve never seen anything like this in my entire career,” said the Army man. “It’s incredible!

 

How did you do it?”

 

“Easy as pie,” replied the local rifleman. “I shoot first and draw the circles afterwards.”

Other versions, applied with Texas as the location, tell of some unknown gunman spraying the side of a barn with shotgun blasts and then drawing a bull’s eye around the greatest cluster, declaring himself a sharpshooter. In terms of statistics or even just scientific observation, the idea is the observer only taking account those data points that “fit” a predetermined narrative while ignoring or discarding all the misses (usually as “random”).

Janet Yellen this week testified before Congress with her best shotgun:

Still, Yellen underscored strength in other sectors of the economy. The job market has made substantial gains since unemployment peaked at 10 percent in 2010. The jobless rate is now just 4.9 percent, in line with what many economists believe is its lowest sustainable level. The number of discouraged workers and those in part-time jobs who want more hours have dropped, though Yellen said there is room for more improvement.

Here is her shotgun in February 2015 in the same setting:

The unemployment rate now stands at 5.7 percent, down from just over 6 percent last summer and from 10 percent at its peak in late 2009. The average pace of monthly job gains picked up from about 240,000 per month during the first half of last year to 280,000 per month during the second half, and employment rose 260,000 in January. In addition, long-term unemployment has declined substantially, fewer workers are reporting that they can find only part-time work when they would prefer full-time employment, and the pace of quits–often regarded as a barometer of worker confidence in labor market opportunities–has recovered nearly to its pre-recession level.

Commentary surrounding Yellen’s testimony only further confirms the fallacy. From UniCredit economist Harm Bandholz:

In a nutshell: Chair Yellen has, correctly in our view, highlighted the solid fundamentals of the US economy. Accordingly, her baseline outlook for both the economy and monetary policy have [sic] not changed. That said, recent developments in financial markets as well as in the global economy have clouded the picture. In this environment, Fed officials prefer to take a step back and wait. Once the clouds have lifted, the gradual normalization of interest rates will continue.

That was, tellingly, exactly the same view that the FOMC and economists took after the September non-decision – that once the August strains in financial markets abated, the “clouds lifted”, they could get back to the work of normalization. Yet, they have persisted again as has the increasingly recessionary circumstances despite the continued drive of the BLS’s statistics toward and into “full employment.” Unlike the labor statistics, however, the cluster of market data and recessionary indications in other economic accounts is much larger and more internally consistent.

As if to further reinforce that point, exit polls from this week’s New Hampshire vote underscored the obvious lack of appreciation for the economy that Yellen keeps talking about; as if the jobs and labor progress in her numbers doesn’t match the popular view of labor out in the real world.

Republican voters expressed deep worries about both the economy (three-quarters were very worried) and the threat of terrorism (6-in-10 very worried)…

 

Though Democrats voting on Tuesday were less apt to say they felt betrayed by their party or to express anger with the federal government, about three-quarters said they were worried about the economy.

It was the same in Iowa, where jobs were a prevalent concern even though the unemployment rate there (and in New Hampshire) is officially calculated below 4%.

In a parallel poll of Democrats, 35 percent said that jobs and the economy were paramount. Those issues ranked second among Republicans, 27 percent of whom named jobs and the economy as the most important.

It’s a rather curious and curiously bipartisan agreement coming during the “best jobs market in decades.” Further, it isn’t any different than the New Hampshire/Iowa concerns from the last Presidential cycle in 2012, meaning that despite the unemployment rate, jobs and the economy remain entrenched in voters’ minds.

Nearly seven in 10 New Hampshire voters say they were “very worried” about the national economy, almost three times the number saying so four years ago before the financial crisis that tanked the economy. Barely more than one in six say their families are “getting ahead” financially, a slide from 2008.

The comparison to 2008 is devastating to Yellen’s fantasy. In early 2008, only two (and a half) in ten were worried about jobs and the economy – early 2008. That seems to offer yet more evidence that the economy shrunk during the Great Recession leaving the positive numbers in employment statistics just that by comparison. And it further isolates Yellen’s sharpshooting in economic prediction and commentary.

It could very well be that the main body of the public has been altered in their perceptions of the economy and even their behavior in it due to the devastating effects of the Great Recession; not unlike what occurred during and after the Great Depression. Either way, however, that still doesn’t add up to what Yellen believes about the economy as presented by the payroll data (and only the surface or headlines of that report). It certainly hasn’t counted for much if anything over the past year and a half. Economists keep claiming economic recovery fulfilled, and yet it is found nowhere other than the BLS.

As noted above, it is certainly not the view of funding and credit markets.

RHINO has only further raged through credit and money curves. In some respects, the levels of depression in funding (“dollar”) prices and indications are beyond description (above). Worse, the implications are the exact opposite of Yellen’s quarantined labor cheer.

We don’t have to go far for motivation, either. In answering why economists and policymakers would throw out the vast and growing volume of especially market-based contradictions to their preferred labor view, we only have to note that this is an existential question for them. In other words, if the market view prevails, as it has already to a great degree, then that means not only are the economic models all wrong (again) they are wrong for the basic reason that monetary policy just doesn’t work. Not that QE and ZIRP don’t work well, as Bernanke himself has been forced to scale back toward, but that it is then exposed that they don’t work at all.

It’s an issue of somewhat clouded nature in the US for specific reasons of the US. In other places, the imprint of QE is far less debatable. From that perspective the observational determination of the QE experiment is not only that QE doesn’t work at all, QE is actually harmful (redistribution) in a way that helps explain why the US would be heading toward recession without a major “shock.” Monetary interference may produce some jobs, but far less than estimated, leaving the redistribution to only bifurcate into further disastrous attrition.

 

Voters in Iowa and New Hampshire seem to be motivated by that presence. Worse, for Yellen and monetarism in politics, they are inspired in an increasingly determined backlash against the “Establishment” which includes, on both sides, perceptions of monetary policy as at least unhelpful. Bernie Sanders young voters in particular, see socialism as the acceptable solution to the “best jobs market in decades” fallacy because they have been taught Alan Greenspan, Ben Bernanke and now Janet Yellen, even with her own socialist tendencies, are all part of the failure of capitalism. Even if the young don’t know exactly what it is, the fact they see it as failure is what counts at this point.

It isn’t capitalism, of course, as central bank interference destroys capitalism. That is the point about oil prices. Monetarism is simply another form of statism and soft central planning – and it works in exactly the same depressive tendencies as everywhere else it has been tried. When everyone else starts to see that more clearly as time drags on (and on), then monetary practitioners are forced into smaller and smaller clusters of what might even slightly suggest that there is success in their life’s work. If necessity the mother of invention, desperation might be the father of fallacy.

That leaves media commentary exposed to at least two logical fallacies, one heaped upon the next. Janet Yellen nor the FOMC has particularly distinguished themselves in just these terms for more than a decade, as even Yellen’s own Vice Chairmen once conceded. Yet, they are still given primary consideration for what passes as mainstream commentary because of instead their credentials alone, despite all the circular reasoning that is offered to maintain them. That is the logical fallacy “appeal to authority”; a very human tendency that the Fed and central banks actively seek to cultivate (more actively in just these kinds of conflicting circumstances). But it only leaves the sharpshooter fallacy and appeal to authority, distinct logical breakdowns, as the picture of the recovery and the supposed defense against onrushing recession.

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

On Friday, some 800 angry Greek farmers marched on the Agriculture Ministry in Athens and beat police with Shepherd’s crooks.

No, really:

The farmers are understandably upset with Alexis Tsipras and the government for a proposal to triple the social security burden and double income taxes in an effort to appease the powers that be in Brussels who claim Greece has not made enough progress towards fiscal consolidation since the country’s third bailout was agreed last August.

Tsipras and Syriza swept to power a little over a year ago with promises to roll back austerity, but prolonged negotiations with creditors and the resulting economic malaise that gripped the country last summer broke the PM’s revolutionary spirit and now, he’s been reduced to something of a technocrat rather than a socialist firebrand.

Putting Greece on a sustainable path is a virtual impossibility at this juncture. There are myriad structural problems that cut to the heart of the currency bloc’s woes and on top of that, Athens’ debt burden is simply astounding. In other words, Tsipras and Brussels can raise taxes and cut pension benefits all they want but this problem is never going to be solved. It’s too late.

Adding insult to injury, data out Friday shows the country slipped back into recession in Q4.

All of this helps to explain why, after the tomato-tossing, stick-waving melee at the Agriculture Ministry, the farmers – joined by some 10,000 of their compatriots as well as union members, massed in Syntagma Square on Friday where tractors could be seen meandering through the crowd.

While that clip depicts a mostly peaceful scene, things weren’t so calm earlier in the day when still more farmers clashed with authorities and beat a police car half to death:

And the punchline to the whole thing is that one farmer told RT that if the measures are passed the entire lot will simply pack up and leave. “We cannot let the government pass these catastrophic measures. If they pass, we are going to have to become migrants,” Antonis Bitsakis, a member of the coordinating committee of the farmers of Creta said.

So there you have it. An irony of ironies. Thanks to Berlin’s austerity demands, Athens will not only be sending Mid-East refugees north to Germany, it will be sending Greek asylum seekers as well.

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