Tag: finance

Authored by Mac Slavo via SHTFplan.com,

Social media giant Facebook continues to ramp up the creepy factor. According to a recently filed patent, Facebook wants to spy on you by hiding inaudible messages in TV ads.

Facebook has filed a patent for a system that hides audio clips in TV commercials. These sounds would be so high-pitched that they are inaudible to human beings. They would then trigger your phone to record all the background noises in your home. The patent application is called “broadcast content view analysis based on ambient audio recording.”

According to The Daily Mail, these secret messages would force your phone to record the audio of the private conversations you have without you even knowing. According to a patent application by the social media platform, clips taken of your background conversations and your movements across a room would help advertisers determine whether or not you are watching their promotions.

According to the patent, originally discovered by Metro, the system would use “a non-human hearable digital sound” to activate your phone’s microphone. This noise, which could be a sound so high-pitched that humans cannot hear it, would contain a “machine recognizable” set of Morse code-style beeps. Once your phone “hears” or recognizes the trigger, it would begin to record the “ambient noise” in the home, such as the sound of your air conditioning unit, plumbing noises from your pipes, and even your movements from one room to another. Your phone would even listen in on “distant human speech” and “creaks from thermal contraction”, according to the patent.

Facebook is currently working on the controversial software too, said a patent application published on June 14 this year. If you’re like the rest of us, you might think this sounds like an Orwellian nightmare technology which will let Big Zucker intrude upon the lives of millions of unsuspecting people in unprecedentedly terrifying ways.

The tech is going to be used to monitor what people watch on their “broadcasting device” so that the adverts they are shown on Facebook are likely to appeal to them. This would also allow companies to get an accurate sense of the size of the audience which has viewed their promotion. That’s what Facebook says in its patent, however, there is absolutely no mention of spying on our private lives, invading our privacy, recording our intimate conversations, and forcing advertising into the heart of our homes whatsoever.

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A group of around 20 chanting protesters descended on White House adviser Stephen Miller’s Washington D.C. apartment on Monday, distributing “wanted” flyers which refer to Miller, a Jew, as a “white nationalist, Trump lackey, and architect of both the Muslim Ban and Family Separation.” 

They are handing out these flyers to Stephen Miller’s neighbors at the luxe CityCenterDC pic.twitter.com/OYmllt6JEj

— Rachel Sadon (@Rachel_Sadon) June 25, 2018

“Say it loud, say it clear: immigrants are welcome here,” shouts a group of about a dozen people outside Stephen Miller’s apartment building pic.twitter.com/Z6bv5OYcOn

— Rachel Sadon (@Rachel_Sadon) June 25, 2018

Protesters are protesting outside Stephen Miller’s apartment right now pic.twitter.com/b8JS0QALOp

— Rachel Sadon (@Rachel_Sadon) June 25, 2018

Miller – largely credited with pushing President Trump’s “zero tolerance” immigration policy of arresting and processing those entering the U.S. illegally – was also heckled at a Mexican restaurant last week. 

“Hey look guys, whoever thought we’d be in a restaurant with a real-life fascist begging [for] money for new cages?” a diner said to Mr. Miller, a witness told The New York Post.

Two days later, a group of protesters with the Democratic Socialists of America – including a DOJ paralegal – chased Homeland Security Secretary Kirstjen Nielsen out of a Mexican restaurant near the White House. Days later, protesters showed up at Nielsen’s Alexandria townhouse.

Protestors are outside of DHS Secretary Kirstjen Nielsen’s Alexandria townhouse, playing audio of the detained children. She appears to be still be home. pic.twitter.com/akIcxOcM3q

— Philip Lewis (@Phil_Lewis_) June 22, 2018

Last Friday, White House Press Secretary Sarah Huckabee Sanders was ejected from a Lexington, VA restaurant because the gay staff was too triggered by her presence. 

According to former Arkansas Governor Mike Huckabee, Sanders’ father, the owner of the Red Hen followed Sanders’ family across the street to another restaurant, causing a “scene.”

Mr. Huckabee told conservative radio host Laura Ingraham on Monday that Stephanie Wilkinson, owner of the Red Hen in Lexington, Virginia, kicked Mrs. Sanders and her family out of the restaurant and then proceeded to yell at them when they tried to go to a different restaurant across the street. –Washington Times

“There’s a part of that story that hasn’t been told, you’re going to be the first to hear it,” Mr. Huckabee said, Mediaite first reported. “Once Sarah and her family left, of course Sarah was asked to please vacate, Sarah and her husband just went home. They had sort of had enough. But the rest of her family went across the street to a different restaurant.

“The owner of the Red Hen — nobody’s told this — then followed them across the street, called people, and organized a protest yelling and screaming at them from outside the other restaurant and creating this scene,” he said.

This restaurateur of The Red Hen Stephanie Wilkinson not only told @PressSec Sanders to leave–acc to @GovMikeHuckabee on my radio show today, she FOLLOWED Sanders’ family across the street to harass them at the other restaurant they went to! https://t.co/DEo2QOAcTY

— Laura Ingraham (@IngrahamAngle) June 25, 2018

This is NOT a good sign. But it is the new reality of the intolerant Left.@GovMikeHuckabee pic.twitter.com/Ci8hd7XeGK

— thebradfordfile™ (@thebradfordfile) June 23, 2018

The “witch hunt” for Miller, Nielsen and Sanders was encouraged by Congresswoman Maxine Waters (D-CA), who openly called for people to form a mob and physically confront members of Donald Trump’s administration if they see them out in public after controversy over separated migrant families erupted two weeks ago. 

And on Monday, we reported that a decapitated and burned animal carcass was found on the porch of a Department of Homeland Security (DHS) staffer, the latest in a spate of threats tied to President Trump’s immigration policy, according to WTOP/ABC.

Around two dozen incidents have been reported against government employees issued in the past few days – primarily against Immigration and Customs Enforcement (ICE) officers, which resulted in a determination by Homeland Security that there is a “heightened threat against DHS employees.” 

In short, the hunt is intensifying for anyone associated with Trump or his policies. If history is any indication of what’s to come, this may get violent. Then again, it may be the shortest civil war in history…

The Civil War is Here – me: Not worried at all! 🇺🇸 pic.twitter.com/cnIaOVEGrz

— SouthernChick (@hayleymorsen) March 27, 2017

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The NTSB has released new preliminary information on a Model S crash that took place in early May of this year, noting that the vehicle was traveling a stunning 116MPH at the time it wrecked.

The crash, which killed two teenagers and injured a third, happened on State Route A1A in Fort Lauderdale, Florida. The following information hit the wires in the afternoon on Tuesday:

• NTSB SAYS TESLA WAS TRAVELING 116 MPH IN SECONDS BEFORE CRASH
• NTSB RELEASES PRELIMINARY REPORT ON TESLA FIRE IN FLORIDA
• TESLA MODEL S DRIVEN BY 18-YEAR-OLD HIT WALL, CAUGHT FIRE

The NTSB investigation had been ongoing since early May, according to CNBC.

The investigation was previously said to have focused on the electric battery fire that occurred after the crash, and it was also reported shortly after the crash that Autopilot was not likely to be involved or investigated. The initial police report for the crash noted that speed was likely a factor.

It’s not until the full NTSB report is released that we will have further details whether or not the battery was at fault for the fire that ultimately engulfed the vehicle. We had previously reported on details of the crash shortly after it took place.

As WPLG reported at the time, in the “horrific crash” of the Tesla Model S with three young people hit a wall and then caught on fire, while a third teen was ejected from the car.

A third man, also 18, who was in the backseat of the Tesla Model S, was thrown from the car when it crashed in the 1300 block of Seabreeze Boulevard, said Tracy Figone, a spokeswoman for the Fort Lauderdale Police Department. He was hospitalized. His condition was not known.

Neighborhood resident Wendy Mascolo told WFOR-Ch. 4 that she heard the violent crash when it happened and ran to help. “These parents, they got the worst call of their lives and their lives are never going to be the same,” she told the station.

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Ever since the start of 2018, an odd divergence has emerged in credit markets, where Investment Grade bonds have seen their spreads leak progressively wider, hitting levels not seen in 2 years, while the bid for higher yielding, and much more risky, junk bond debt has been seemingly relentless, with high yield spreads near all time lows.

To be sure, many reasons have been offered, with Bank of America suggesting that IG weakness is “due to supply pressures in an environment of reduced demand that began in March and extended through last week, plus the Italian situation, which is about systemic risks running through the global IG financial system.” Meanwhile, it believes the strength in HY is mostly due to the lack of supply of higher yielding paper.

Whatever the suggested reasons, however, the underlying causes are two: an environment of artificially low interest rates created by central banks, and unyielding, pardon the pun, investor euphoria. In other words: a multi-year credit boom.

And while the Fed’s “macroprudential regulation team” appears to have zero problems with what is going on in the world of junk bonds, the IMF has sounded the alarm on the troubling developments in junk bond land in particular, and capital markets in general.

In its The Chart of the Week, the IMF Blog shows the impact of a bad credit boom – one which the fund defines as followed by slower economic growth or even a recession – on economic growth in the years that follow. But first, it ask a basic question: what makes for a bad boom? The IMF’s answer:

it is fueled by excessive optimism among investors. When the economy is doing well and everybody seems to be making money, some investors assume that the good times will never end. They take on more risk than they can reasonably expect to handle.

Ok, but how can one tell when risk-taking is getting out of hand? After all the Fed is notoriously bad at being unable to time just when to pull the punch bowl away, and instead lurches from one bubble boom-bust cycle, to another, greater one instead.  According to the IMF, one way to make the distinction is to look at the riskiness of credit allocation, adding that firms where debt expands faster become increasingly risky in relation to those with the slowest debt expansions, posing downside risks to growth down the road. This is obviously common sense.

The second method is more directly linked to the issue at hand, namely the glut in junk bonds. Here is the IMF on how to spot euphoric risk-taking:

Another method is to look at the bond market to see how much of the money companies and governments are borrowing consists of high-yield debt, also known as junk bonds. (These are bonds that offer higher yields to make up for the greater risk of default by the borrower.) The larger the proportion of high-yield debt, the higher the level of risk in the financial system.

Next, in calculating the impact of bad booms on growth, the IMF looked at data on debt issued by governments and non-financial companies in 25 advanced economies, and defined a boom as a period of faster-than-normal growth in credit relative to GDP. Finally, it looked at how much of the credit growth consisted of high-yield debt.

And, judging by the current conditions, the IMF found that the world effectively finds itself in just such a “bad boom” phase.

So what then? 

The IMF concluded that credit booms marked by a rising share of junk bonds were followed by lower economic growth over the following three to four years.

When the high yield share of debt rises by one standard deviation—a statistical measure of how much one number differs from the average in a set of numbers—GDP growth over the next three years is lower by 2 percentage points.

This is shown in the chart below which reveals that junk bond driven credit booms are followed by sharp economic slowdowns in the following “three to four years.”

The IMF concludes that this result suggests that “when credit is growing quickly, policymakers should pay attention to how much of that growth is allocated to riskier firms, such as those that issue high-yield debt.”  Well, not only is junk debt growing quickly, it has never been greater.

The IMF’s solution on how to avoid a credit bust recession?

Steps to fix the problem may include higher capital requirements and other measures to restrain credit growth and tighten lending standards more broadly.

Needless to say, not only are no regulators actively seeking to restrain credit growth, but lending standards have never been easier, which is to be expected when none other than the ECB is actively buying corporate bonds.

Source: IMF

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Authored by Nick Cunningham via OilPrice.com,

The difference between WTI and Brent narrowed significantly over the past few days, as the forces driving the two benchmarks apart seemed to have reversed course.

For the past few weeks and months, WTI suffered a steep discount relative to Brent, a reflection of a series of factors that made North America well supplied with oil, while the rest of the world saw supplies tighten significantly. U.S. shale production has soared over the past few years, but really accelerated at a blistering pace in 2018. North America has been overflowing with oil, and much of the additional supply has been routed through Gulf Coast export terminals, if producers can get their oil out of West Texas.

Meanwhile, the OPEC cuts began to bite harder in the second half of 2017 and in the first six months of this year. The result was a sort of two-speed oil market – ample supplies in the U.S., and an increasingly tight market everywhere else.

The discount widened to nearly $10 per barrel in June, a staggering differential.

But in a surprising turn of events, the two benchmarks converged significantly in the past few days.

A week ago, the price differential topped $9 per barrel, but the gap narrowed to $6 per barrel as of Monday.

(Click to enlarge)

The reasons for this are multiple, but they largely come down to the fact that the fortunes of both benchmarks suddenly flipped. OPEC+ decided to add more oil onto the market last week – nominally 1 million barrels per day, but in reality something more akin to 600,000 bpd. That has eased fears about a supply crunch.

Meanwhile, the supply/demand balance in North America suddenly looks a bit tighter than it did earlier this month. The pipeline constraints in the Permian are starting to bite, and there are growing expectations that shale drillers will have to curb output growth because available takeaway capacity has all but vanished. The long list of aggressive forecasts regarding shale growth might have to be revised down.

Also, inventories continue to decline. Last week saw a rather significant decline of 5.9 million barrels. Stocks in Cushing are already at their lowest level in years. “The spread between WTI and Brent is shrinking as OPEC’s output increase is having a bigger impact on Brent than WTI,” Hong Sungki, a commodities trader at NH Investment & Securities Co., told Bloomberg. “Cushing stockpiles are quickly withdrawing as the U.S. summer driving season boosts refiners’ demand for crude, supporting WTI prices.”

More importantly, at least in the near run, was the unexpected outage from an oil sands project in Canada. Syncrude Canada saw an equipment malfunction that could reduce flows from Canada by 360,000 bpd for the month of July, “putting Cushing potentially on a path to an inventory stockout,” according to a note from Goldman Sachs. “With the global market pricing to pull crude out of the U.S., this loss of U.S. supplies will exacerbate the current global de?cit, making the increase in OPEC production all the more required.” The expected loss could translate into a reduction in inventories by around 14 million barrels.

The outage in Canada led to a “sharp repricing of North American crudes with sharply stronger WTI timespreads and tighter differentials,” Goldman wrote. The cash vs. front-month WTI differential went from essentially nothing to nearly $3 per barrel immediately after Syncrude Canada’s announcement. In other words, investors became worried about the immediate availability of supply.

The narrowing of WTI to Brent could eliminate the incentive to ship oil by rail from the Midwest to the Gulf Coast, as the arbitrage opportunity gets zeroed out. “Such differentials, if sustained, would help limit the magnitude of steeper draws in Cushing, albeit by reducing supply to the USGC and global market,” Goldman concluded. In essence, the shrinking price differential between WTI and Brent could lead to more oil staying within the U.S., offsetting the interruptions from Canada to the U.S. Midwest.

That means a potential slowdown in the growth of U.S. crude oil exports. U.S. oil exports surged this year, particularly to Asia, because Asian refiners could save a bundle by opting for crude oil from the U.S. Gulf Coast instead of oil from the Middle East, for instance, even after factoring in higher transportation costs. There is still plenty of room for U.S. exports at a $6-per-barrel WTI discount, but if it narrows further, the business case starts to get trickier.

The pressure on WTI could ease if the outage in Canada is not as bad as feared, or if U.S. shale continues to grow at a quick pace. But, for the first time in months, WTI and Brent have narrowed the gap.

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Five months after banning a number of ads on its social network, Facebook has updated its “prohibited products and services policy” allowing crypotcurrencies to once again be advertised (but not ICOs or binary options).

image courtesy of CoinTelegraph

Facebook’s Product Management Director, Rob Leatham explains:

In January, we announced a new policy to “prohibit ads that promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings and cryptocurrency.” At the time we also made clear that “this policy is intentionally broad while we work to better detect deceptive and misleading advertising practices… We will revisit this policy and how we enforce it as our signals improve.”

In the last few months, we’ve looked at the best way to refine this policy — to allow some ads while also working to ensure that they’re safe. So starting June 26, we’ll be updating our policy to allow ads that promote cryptocurrency and related content from pre-approved advertisers. But we’ll continue to prohibit ads that promote binary options and initial coin offerings.

Advertisers wanting to run ads for cryptocurrency products and services must submit an application to help us assess their eligibility — including any licenses they have obtained, whether they are traded on a public stock exchange, and other relevant public background on their business. Given these restrictions, not everyone who wants to advertise will be able to do so. But we’ll listen to feedback, look at how well this policy works and continue to study this technology so that, if necessary, we can revise it over time.

It’s important that we continue to help prevent or remove misleading advertising for these products and services. So please continue to report content that violates our Advertising Policies by selecting “report ad” in the upper right-hand corner of any advertisement.

For now, no immediate reaction in crypto-prices…

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Days after Austria threatened to reinstate border checks, Austrian forces conducted border-security exercises on Monday in the border town of Spielfeld in preparation for a wave of 80,000 migrants expected to travel through the new “Balkan route” from Albania, Montenegro, Bosnia and Croatia to Western and Central Europe.

“A state which can’t protect its borders when needed loses its credibility,” said Interior Minister Herbert Kickl, who was in charge of the exercise along with Defence Minister Mario Kunasek. Over 500 Austrian policemen and 220 soldiers, including those in the new “Puma” unit took part in the drills, which included a display of “Black Hawk” helicopters and simulated border unrest in which cadets played unruly migrants. 

Austria simulates response to migrants in border exercise | https://t.co/N30JMuhlZP pic.twitter.com/q8ZLhUmHBC

— RTÉ News (@rtenews) June 26, 2018

Both Kickl and Kunasek are members of the conservative Freedom party (FPOe) – which has been the junior partner in a coalition government under conservative chancellor Sebastian Kurz. On Monday, Kursz said that Austria would “be ready and do everything necessary to protect our borders if Horst Seehofer, Germany’s interior minister, goes ahead with plans to protect his country’s southern boundary.”

“We must also be prepared for the case that in a sudden large migratory flow, the border protection measures in these friendly countries no longer help,” said Interior Minister Herbert Kickl in mid-June, adding “We also show that we are serious. There will be no registration and wave-taking with us, but a real defensive attitude.”

“The situation is critical,” said General Fritz Lang, director of Austria’s Federal Criminal Police Office, who says that 30 illegal border crossings are attempted every day. According to Lang, the migrants are primarily young male loners, “many of whom are considered “terrorist fighters,” which require strong border protection.

Austria constructed a reinforced fence on the Slovenian border in late 2015 after a flood of asylum seekers began pouring into the country from Slovenia. Slovenia, meanwhile, built a wall at their southern border with Croatia to stem the flow of migrants north. 

Influx of #refugees: On the #Slovenian–#Austria border. #Sentilj – #Spielfeld on 29-12-2015 15 clock. pic.twitter.com/7lTkuDShnY

— Onlinemagazin (@OnlineMagazin) December 30, 2015

Lang, commenting on the “unsightly scenes” when migrants attempt to enter the country, said “We certainly will not defuse our own situation if we simply mislead people by waving migrants through. And our policemen will be standing so close to the Slovenian border that any application for asylum there will be a case for the Slovenians.”

Kickl, meanwhile, had some harsh words for German chancellor Angela Merkel two weeks ago, saying “The whole problem started with the sentence ‘We can do it’,” in reference to accepting the influx of migrants sweeping Europe.

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Authored by Chris Hamilton via Econimica blog,

I’ll make the case that there are no longer any organic net buyers of US Treasury debt… but that yields do not and will not reflect this reality any time soon thanks to continued buying that can neither clearly be identified nor can be shown to be profitable.

But first, the global situation that has brought us to this.  The Trump trade war is not about fair trade but about a global market that has essentially reached its zenith and all participants will be fighting for maintaining their slices of a shrinking pie.  As the chart below highlights, the 15-45 year old global population minus Africa (blue line) versus the annual change in that population (maroon columns).  Looking solely at the global child bearing population, that population has essentially peaked and will begin declining in the late 2020’s.  Peak annual total growth took place way back in 1988 and has been decelerating for 30 years, now down over 90% from peak.

The chart below again shows the 15 to 45 year old global population minus Africa (blue line) but this time with the annual change in the 15-45 year old population as a percentage of the total global population minus Africa (maroon columns), the Federal Funds Rate (black line), and global debt (red line).  The relatively small annual population growth was responsible for perhaps up to 50% of the annual economic growth creating new infrastructure, housing, factories, suppliers, etc. etc.  As the population growth decelerated, interest rate cuts and debt were substituted in an attempt to maintain a centrally set growth rate.  I show the 15-45yr/old population as there is no estimate here, this population has already been born and we know its size and changes through 2035.

Then, focusing on America.  Again, slowing population growth has been offset by interest rate cuts and a reliance on deficit spending resulting in rising debt to GDP.  Chart below is the annual change in the 20 to 45 year old population (blue columns), federal funds rate (mirroring the change in the population), annual federal Treasury debt issued (red line), and debt to GDP (grey shaded area).  The estimated meager 20 to 45 year old population growth through 2035 only decelerates from here…and given the large debt loads (and interest) coupled with minimal global and national population growth (where it matters), the smart money should count on the FFR following population growth…down.

Focusing On The Treasury Market

There are four sources of potential Treasury buying; the Intra-Governmental trust fund, foreigners, the Federal Reserve, and the domestic public (insurers, pensions, banks, mutual funds, etc.).  The chart below shows the total Treasury issuance, by period, and who did the buying, again per period.  The current period since the Fed ceased buying via QE is totally unique in that foreigners have likewise ceased buying US debt (on a net basis) in spite of continued near record US trade deficits.  The surplus dollars no longer being recycled into Treasuries is akin to a cessation of the North Atlantic current…without the flow, the organic system has broken down.

Below, who among the four sources, did the buying, per period as a percentage of the issuance.  The absence of foreigners, following the Fed’s exit since QE, is quite clear in the most recent period.  I’ll focus on the trillions flowing into Treasury’s from “domestic sources” later but first I’ll focus on the IG, foreigners, and the Fed.

The Intra-Governmental Trust Fund Will Flip From Buyer to Seller, Likely by 2020

With the creation of Social Security in 1935, the trust fund surplus’ were to be “invested” in government interest bearing bonds.  This meant the trust fund surplus tax revenues were spent like regular tax revenue (rather than set aside and saved for when they would be needed).  This created a mandated and ready source of buying for US Treasury debt while simultaneously also decreased the quantity of debt that would go to “market”.  The public debt (marketable) versus the intra-governmental debt (Government Account Series) below.  In 2007, the IG held 44% of all Treasury debt…meaning only 56% was actually auctioned off in the Treasury “market” helping to suppress interest rates.  However, since ’07, marketable debt has surged while IG is unlikely to ever surpass $6 trillion meaning that all further US Treasury debt will be marketable.

Foreigners Follow Federal Reserve, Opt Out of Treasury’s

The chart below shows the total change in foreign held US Treasury’s since 2000.  The relatively consistent bid from ’00 through 2014 versus the collapse in buying since 2015.

BRICS (Brazil, Russia, India, China, S. Africa) versus BLICS (Belgium, Luxembourg, Ireland, Cayman Island, Switzerland), Japan, and the Rest of the World.  Those running large dollar denominated trade surplus’ (BRICS, Japan) have ceased recycling dollars into US debt.  Clearly, Russia and China are recycling much of those dollar surplus’ into gold…and the like is probably true for many other nations as well.

Federal Reserve

Fed Treasury holdings, by duration, charted below.  Note the tripling of Treasury holdings since ’07, but also the surge in longer duration holdings peaking in early 2014.  Of course, the Fed is now “normalizing” its balance sheet…down about 3% from peak holdings thus far in search of perhaps as much as a 50% reduction?  But the feverish buying in short durations and roll off in 5 to 10yr durations and no change to the holdings of long durations are highlighted below.

However, look at the changing durations of the Fed’s Treasury holdings (below) and the impact on the 10yr minus 2yr Treasury spread.  The Fed is back to its pre-GFC holdings of less than 1yr debt, nearing the pre-GFC holdings of 5 to 10yr debt, while chock full of 1yr to 5yr and over 10yr debt.  The Fed has likely rolled off all the 5 to 10yr debt it intends to roll off, and all further Treasury reductions must come in the very short or very long durations.  Which durations the Fed begins rolling off from here is a very good question.

Domestic Treasury Buying

The subsidence of all other sources of Treasury buying means the domestic public is left to do nearly all the buying.  The chart below, with data from 2018 Treasury Bulletin, details who it is among the domestic public doing all the buying.  Not banks, not insurers, not state or local pensions…no nearly all domestic buying is coming from a group called “other” with an assist from mutual funds.  According to Treasury, “other” “includes individuals, Government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors”.  A historical catch-all has turned into the source saving America from an interest rate tsunami?!?

Household net worth as a % of disposable personal income has never been higher, and savings as a % of DPI has only once been lower (and just)…before the last financial crisis.  Simply put, the national DPI (the income remaining from all sources after taxation is paid) has risen far slower than assets have appreciated, and the portion maintained (as a % of DPI) has dwindled dangerously low…again.

If the Federal Reserve continues hiking, a spread inversion is dead ahead, as it has been in front of every recession since 1980.  The chart below shows the spread between the 10yr and 2yr Treasury versus the Federal Funds Rate (essentially, the cost of overnight lending) from ’86 to present.  At the current spread level, an interest rate inversion (and recession) has been imminent every time since 1980.

But, this time, the spread is far more important than it has ever been.  Given the absolute dearth of domestic investible savings available and the leverage already involved to achieve the record net worth to DPI, the interest rate inversion is cutting off the last plausible source of Treasury buying.  During QE1, 2, and 3 there was a wide spread allowing and encouraging those with access to the ZIRP rates to lever up and enjoy the spread.  But at the current spread, this is no longer credible…if a profit or inflation adjusted returns are necessary.

So, the door is closing on the last believable organic buyer of Treasury debt.  The ability for private (“for profit entities”) to borrow short (overnight or up to 3 months) and buy most longer durations of Treasury to achieve a profit is essentially over.  The 1 month and 3 month are already inverted to the FFR, the 6 month and 1 year will likely invert with the next rate hike, and the remainder of durations are likely to invert within the year.  The idea that banks or pensions or insurers, tasked with achieving alpha returns, would go into an unlevered trade sure to underperform inflation is pretty laughable.

This means the continued issuance of new debt in excess of a trillion annually will have no natural buyers…except for those buying without a profit motive and those not in need of selling assets to raise new cash. 

Simply put, the US Treasury market is now a centrally directed farce where supply and demand no longer determine prices or yields…as is the JGB market and European sovereign debt markets…and who knows how many more.  Unfortunately, this situation will not get better…or stabilize…but will only worsen due to the demographics and population trends shown initially.  Of course, when the second most important asset (next to the crime scene that is the gold and precious metals “market”) no longer is allowed to freely determine prices between willing seller and buyer, you should know everything else downstream is likewise entirely tainted.  This doesn’t necessarily mean a collapse is imminent, it just means the ideals of capitalism, self determination, and democracy…the cornerstones of America…are no trusted or employed.  Make of this what you will and invest accordingly.

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The Department of Justice (DOJ) is refusing to release intercepted material alleging that former Attorney General Loretta Lynch conspired with the Clinton campaign in a deal to rig the Clinton email investigation, reports Paul Sperry of RealClear Investigations. 

The information remains so secret that Justice Department Inspector General Michael Horowitz had to censor it from his recently released 500-plus-page report on the FBI’s investigation of Clinton, and even withhold it from Congress.

Not even members of Congress with top secret security clearance have been allowed to see the unverified accounts intercepted from presumed Russian sources in which the head of the Democratic National Committee, Debbie Wasserman Schultz, allegedly implicates the Clinton campaign and Lynch in the scheme.

“It is remarkable how this Justice Department is protecting the corruption of the Obama Justice Department,” notes Tom Fitton of Judicial Watch, which is suing the DOJ for the material.

Wasserman Schultz, Lynch and Clinton have denied the allegations and characterized them as Russian disinformation. 

True or false, the material is consequential because it appears to have influenced former FBI Director James B. Comey’s decision to break with bureau protocols because he didn’t trust Lynch. In his recent book, Comey said he took the reins in the Clinton email probe, announcing Clinton should not be indicted, because of a “development still unknown to the American public” that “cast serious doubt” on Lynch’s credibility – clearly the intercepted material.

If the material documents an authentic exchange between Lynch and a Clinton aide, it would appear to be strong evidence that the Obama administration put partisan political considerations ahead of its duty to enforce the law. –RealClear Investigations

Then again, if the intercepts are fabricated, it would constitute Russia’s most tangible success in influencing the 2016 U.S. election – since Comey may not have gone around Lynch cleared Clinton during his July 2016 press conference – nor would he have likely publicly announced the reopening of the investigation right before the election – an act Clinton and her allies blame for her stunning loss to Donald Trump. 

The secret intelligence document purports to show that Lynch told the Clinton campaign she would keep the FBI email investigation on a short leash – a suggestion included in the Inspector General’s original draft, but relegated to a classified appendix in the official report and entirely blanked out. 

What is known, based on press leaks and a letter Senate Judiciary Committee Chairman Chuck Grassley sent Lynch, is that in March 2016, the FBI received a batch of hacked documents from U.S. intelligence agencies that had access to stolen emails stored on Russian networks. One of the intercepted documents revealed an alleged email from then-DNC Chairwoman Wasserman Schultz to an operative working for billionaire Democratic fundraiser George Soros. It claimed Lynch had assured the Clinton campaign that investigators and prosecutors would go easy on the presumptive Democratic presidential nominee regarding her use of a private email server while serving as secretary of state. Lynch allegedly made the promise directly to Clinton political director Amanda Renteria. –RealClear Investigations

“The information was classified at such a high level by the intelligence community that it limited even the members [of Congress] who can see it, as well as the staffs,” Horowitz explained last week during congressional testimony in front of the Senate Judiciary Committee, which has oversight authority over Justice and the FBI.

Congressional sources told RealClearInvestigations the material is classified “TS/SCI,” which stands for Top Secret/Sensitive Compartmented Information. –RealClear Investigations

Horowitz said that he has asked Deputy AG Rod Rosenstein and FBI Director Christopher Wray to work with the CIA and Office of the Director of National Intelligence to figure out if the intercepted material can be rewritten to allow congress to see it. Once appropriately redacted to protect “sources and methods,” said Horowitz, he hopes that members of congress can then go to the secure reading room in the basement of the Capitol Building, called the “tank,” and view the materials. 

“We very much want the committee to see this information,” Horowitz said.

For some strange reason, CNN, WaPo and the New York Times have uncritically taken Lynch, Clinton and Wasserman Schultz’s denials at face value, dismissing the compromising information as possibly fake and unreliable. Horowitz even quotes non-FBI “witnesses” in his report describing the secret information as “objectively false.” 

FBI Sandbagging

While the FBI apparently took the intercept seriously, it never interviewed anyone named in it until Clinton’s email case was closed by Comey in July 2016. In August, the FBI informally quizzed Lynch about the allegations – while Comey also reportedly confronted the former AG and was told to leave her office.

Comey said he had doubts about Lynch’s independence as early as September 2015 when she called him into her office and asked him to minimize the probe by calling it “a matter” instead of an “investigation,” which aligned with Clinton campaign talking points. Then, just days before FBI agents interviewed Clinton in July 2016, Lynch privately met with former President Bill Clinton on her government plane while it was parked on an airport tarmac in Phoenix. In a text message that has since been brought to light, the lead investigators on the case, Peter Strzok and Lisa Page, made clear at the time their understanding that Lynch knew that “no charges will be brought” against Clinton.

Renteria, the Clinton campaign official, who ran for governor of California but failed to secure a top-two spot in the primary, insists the intelligence citing her was disinformation created by Russian officials to dupe Americans and create discord and turmoil during the election.  –RealClear Investigations

The FBI and Washington Post have both investigated this and concluded that the story-line has no basis in reality. It was simply made up by the Russians.

— Amanda Renteria (@AmandaRenteria) June 18, 2018

While Lynch has never been directly asked under oath by Congress about the allegation – she swore in a July 2016 session in front of the House Judiciary Committee “I have not spoken to anyone on either the [Clinton] campaign or transition or any staff members affiliated with them.” 

Senate Judiciary Chairman Chuck Grassley (R-IA) says he’ll issue a subpoena for Lynch, but the panel’s top Democrat Dianne Feinstein (CA) has to agree to it per committee rules. Grassley also said he would be open to exploring immunity for Comey’s former #2, Andrew McCabe.

Feinstein may be hesitant to sign on, as she says she thinks Comey acted in good faith – which means she thinks Congress shouldn’t have a crack at questioning a key figure in the largest political scandal in modern history.

“While I disagree with his actions, I have seen no evidence that Mr. Comey acted in bad faith or that he lied about any of his actions,” said Feinstein during a Monday Judiciary panel hearing. Former Feinstein staffer and FBI investigator Dan Jones, meanwhile, continues to work with Christopher Steele and Fusion GPS on a $50 million investigation privately funded by George Soros and other “wealthy donors” to continue the investigation into Donald Trump.

Of interest, Amanda Renteria is also former Feinstein staffer. Also recall that Feinstein leaked Fusion GPS founder Glenn Simpson’s Congressional testimony in January.

Lynch was dinged in the IG report over an “ambiguous” incomplete recusal from the Clinton email “matter” despite a clandestine 30-minute “tarmac” meeting with Bill Clinton one week before the FBI exonerated Hillary Clinton.

Interesting how a “dossier” full of falsehoods about Trump not only released to the public, but was used by the FBI as part of an espionage operation on the Trump campaign – while an intercepted communication from Russia is suddenly classified as so top-secret that even members of Congressional intelligence oversight committees can’t see it.

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