Venezuela Launches Biggest Ever “Military Exercise” In History: A Preview Of What Is Coming

Last weekend, during our latest reporting on the whirlwind collapse in Venezuela’s economy and society, we reported that as part of Maduro’s latest set of emergency decrees as part of which he ordered a 60-day state of emergency due to what he called plots from Venezuela and the United States to subvert him, we also previewed something more troubling: “he hinted that a violent crackdown on enemies, both foreign and domestic, may be imminent when he ordered military exercises for next weekend.”

As it turns out it won’t be just any exercises, but as Bloomberg writes, “Venezuela is preparing for the biggest military exercises in its history this Saturday after the South American country’s government said it’s on high alert as the opposition pushes for a recall referendum on President Nicolas Maduro.

Venezuela’s national guard

“Venezuela is threatened,” Defense Minister Vladimir Padrino Lopez said on state television Thursday. “This is the first time we are carrying out an exercise of this nature in the country. In terms of national reach, it’s going to be in every strategic region.” When Maduro announced the exercises last weekend in a rambling press conference on Tuesday, he said U.S. spy planes including an Boeing 707 E-3 Sentry had entered the country’s airspace illegally this month.

Just two corrections to Mr. Lopez’ statement: it is not Venezuela that is threatened, it is Maduro’s regime, and the source of the threat is not external, it is the people themselves who have had it with the country’s devastated economy.

With this military deployment, which is nothing less than a dramatic show of force by the soon to be overthrown Maduro, the most likley outcome is a crackdown by the president on either the opposition or protesters, or both; the only question is whether the army will follow the inevitable order to turn against its own people. A recent interview with a member of the Bolivarian National Guard did not provide much clarity on this most important issue.

Opposition governor Henrique Capriles said a “moment of truth” had arrived for the country’s Armed Forces Tuesday, a day before security forces used tear gas to turn back anti-government protesters in central Caracas. The opposition has pledged further demonstrations across the country to pressure the electoral board, or CNE, to process a petition to activate a recall referendum. They accuse the government of stalling the process to avoid early elections.

We expect demonstrations to resume tomorrow, and to turn violent once the massive military deployment meets with thousands of protesters in the streets.

To some the military’s show of force is just that, a distraction which buys the failing regime a few more days or weeks of time: “The government is looking to victimize itself to both the international community and its own followers,” Rocio San Miguel, director of Caracas-based, non-profit security researcher Citizens’ Control, said in an interview. “They’re looking for a distraction to buy time, and there’s no better distraction than the military one.

Others, such as PanAmPost’s Sabrina Martin, disagree.

She notes that the Venezuelan opposition announced on Wednesday, May 18 that it is marching to the headquarters of the National Electoral Council (CNE) to force the electoral body to ensure the recall referendum process continues against Maduro. In response, some cities around the country have been militarized.


Police surround the opposition march

Caracas decided to close at least 14 subway stations to prevent the mobilization of citizens while hundreds of police and soldiers closed entrances to Plaza Venezuela, the gathering place for the march.

People on Twitter reported strong traffic congestion on the main avenues of the city. Motorized National Police were also on patrol, and there were several military tanks stationed on corners. Similarly, all access to the Central University of Venezuela was blocked with a strong National Guard presence.

Guarenas, the scene of looting and large protests earlier in the week, also woke up to a military and police presence on the streets. CNE headquarters were surrounded by security officials in western Tachira. On Twitter, Venezuelans complained that Valle de la Pascua in the country’s central region was also militarized, just as Maturin was in the east. Martin adds that the governor of Miranda and former presidential candidate Henrique Capriles announced, however, that marches toward the offices of the Electoral Council will still happen.

The clip below shows the clashes that took place in Caracas on Thursday in a bit to up the pressure for a recall referendum against Maduro.

Meanwhile, Maduro pled ignorance: during a press conference, President Maduro mocked the international media for questioning cities under military control. “What militarization?” He asked. “Show me.”

Tomorrow it is likely that the whole world will see, because when a autocratic regime takes away everything from its people including hope, the only outcome is a change in government, achieved either by peaceful means or otherwise.

For those who need a reminder of just how much Maduro’s socialist paradise has taken away from the people it is supposed to represent, here is a stark reminder:

  • Inflation in Venezuela is predicted to reach 700 percent within the year, which would be the world’s highest.
  • According to the Confederation of Venezuela Industry, in the Chavista era, approximately 8,000 businesses have closed.
  • More than 70 percent of Venezuelans believe President Nicolás Maduro should step down.
  • There were 2,138 protests and more than 170 lootings between January and April this year, according to the Venezuelan Observatory for Social Conflict. That’s about 18 per day.
  • Venezuela has one of the highest murder rates in the world. There were 28,000 in 2015. That’s 76 violent deaths per day and three per hour.
  • According to an Encovi survey, 87 percent of Venezuelans can’t afford to buy food.
  • According to the National Federation of Farmers, 2015 saw Venezuelans reduce their meat consumption by 42 percent compared to 2012 — the largest drop in 55 years.
  • Ninety percent of citizens said they buy less food due to scarcity.
  • According to polling group Datanalisis, there are shortages of basic food in 80 percent of supermarkets and 40 percent of homes.
  • While Latin America’s infant malnutrition rate hovers around 5 percent, the Bengoa Foundation found that it was near 9 percent in Venezuela as of 2015.
  • Public medical systems have reported that 44 percent of operating rooms are non-functional, and 94 percent of labs do not have sufficient supplies.

The Venezuelan people have no medicine, electricity, food, water or hope. What they do have, and plenty of it, is street crime, homicide and desperation. And, whether faced with a militarized army or not, they will soon have a revolution, because when yet another country is destroyed by a regime that chooses to only look after itself, that is the only possible outcome.

Meanwhile, here is a preview of what one may expect tomorrow.

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Evil, Incorporated

About a week ago, I wanted to watch something (out of the corner of my eye, as I often do during my trading day) that wasn’t one of the movies I’ve seen a thousand times already. I fired up Netflix, and I decided to watch The Smartest Guys in the Room, the Enron story, whose trailer is here:

I love documentaries, and I love learning about business scandals, but even though I already knew the Enron tale fairly well, watching this movie made me really mad.

As long-time readers know, I’m a big fan of capitalism, and I’m absolutely all for entrepreneurs and innovators getting stinking rich. That’s just fine and dandy. Enjoy your jet, your mansion, and your yacht. Nothing wrong with any of that, so long as it is procured honestly. (This kind of leaves out 100% of Russian businessman, and 99% of the Chinese).

But when crooked accountancy or other nefarious means are the road to fortune, well, screw you. Society needs to confiscate everything you have and throw you into the slammer. And that is precisely what happened to Enron’s senior management, and it’s a sad tale.

I distinctly remember back in 2000 when Enron was the talk of the town. It was on the cover of magazines every week, and – – – believe it or not – – they actually flew out to Palo Alto to buy Prophet! I was soon thereafter, along with a couple of other Propheteers, brought to their Houston headquarters to explain the company. I was dazzled by the glitz and glamour of it all. But, Thank God, the deal never went anywhere. If it had, I would have wound up with absolutely nothing.

While watching the movie, I was reminded of the back-slappin’, Texas-drawlin’, frat-boy dumbshit good-old-boys that were running the place. By the year 2000, the hubris was something of Greek tragic proportions, including the time when Skilling famously addressed a Wall Street analyst as “asshole” during a conference call, simply because he has a non-softball question. The analyst – – perhaps one of the few in human history who actually did their job properly, since most Wall Street analyst are whores – – was prescient, to say the least:

Their accounting firm, Arthur AndersenArthur Anderson, went down with the ship. The founder of the place, who started it in 1913, would have wept bitter tears………

Andersen, who headed the firm until his death in 1947, was a zealous supporter of high standards in the accounting industry. A stickler for honesty, he argued that accountants’ responsibility was to investors, not their clients’ management. During the early years, it is reputed that Andersen was approached by an executive from a local rail utility to sign off on accounts containing flawed accounting, or else face the loss of a major client. Andersen refused in no uncertain terms, replying that there was “not enough money in the city of Chicago” to make him do it. For many years, Andersen’s motto was “Think straight, talk straight.

The shame of the accounting firm was that the sin involved was shredding of documents by a handful of the folks in the Houston office, but since this fiasco nuked the entire firm, the worldwide workforce of 84,000 people suddenly had no jobs. Incredible.

What of the funny ironies of the entire episode is that the ONE guy who made a huge fortune and got away with it scot-free………..and this is in Texas, mind you…………was a bespectacled Chinese dude named Lou Pai who was obsessed with going to strip clubs (and bringing aforementioned strippers up to his office to check out his digs).  He even wound up dumping his wife and marrying a stripper instead! Anyway, he got away with something like a quarter billion bucks and became the second-largest landowner in the state of Colorado.

Of course, the very notion of a vigorous government assault on white collar crime seems absolutely quaint today. The sins being committed by the likes of Goldman Sachs go completely unmentioned (lest those who mention them be labeled as, for one thing, anti-Semitic, as the talented reporter Matt Taibbi was), so they are left alone to do whatever the hell they want. You need look no farther than this very week to see Goldman doing things that, by rights, should have people in handcuffs………….but nope, not anymore.

I hope I live to see the day when all the present-day darlings that have sold their souls for money are finally exposed for what they are. The men behind Enron were, and in those days people wondered why it took society so long to wake up. These days, it would be breathtaking if the government even put one-tenth the same effort into prosecutions. Anyway, it will be better for us all if a little justice were served once again. In the meantime, if you have Netflix, watch the movie. It’ll make your blood boil.

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Here Are The Highest Paying Companies In America… At The Moment

When bubbles are created, everything is rainbows and unicorns – literally unicorns. The number of start up tech firms that were privately valued at over $1 billion exploded to at least 30 companies in 2014.

Of course, other periphery assets got inflated when venture capitalists were pouring oodles of money into tech firms with ridiculous valuations. Housing prices in Silicon Valley for example saw soaring prices and demand during such times.

As the tech bubble continued to inflate, people flocked to areas in and around Silicon valley in order to gain employment. This made the area dominate the "Best Cities In The US For Jobs" list that came out not long ago.

Recently, a ranking of top paying companies in the US also showed the technology industry's meteoric rise in all categories. As Marketwatch points out, the second most well-paid industry is technology, with Juniper Networks coming in third overall, followed by Google at fifth. VMware, Amazon Lab, Guidewire, and Cadence Design Systems rounding out the rest of the top spots.

And of course, the highest paid are the "Consultants" – AT Kearney and Strategy& – who we would guess, are making most of their fees from 'advising' the tech industry also…

However, as is the case with every bubble, the tech bubble 2.0 has now officially burst. The economy is softening, start-ups are having to face down rounds as they raise capital, firms are laying off, and the housing bubble has burst.

Just as we cautioned those who saw the best cities for jobs data, we again warn everyone who reviews the highest paying companies data that now may not be the best time to pick up and head out to the West Coast in hopes of landing that dream tech job.

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The Biggest Bubbles: China vs. The U.S.

Submitted by Jeff Nielson via SprottMoney.com,

There is perhaps no other area where the tunnel-vision, hypocrisy, and corruption of the U.S. media is more visible than with respect to its nearly incessant China-bashing. Previous commentaries have exposed such vacuous drivel again and again and again.

While the subject matter of the Corporate media’s China-bashing varies month to month, regularly interspersed in this propaganda are numerous variations of “China’s economy is in a bubble.” Once again this week, this is a theme in the U.S. mainstream media . Once again, we see hypocrisy of epic proportions.

Chinese markets have rarely looked more like Vegas casinos. In recent weeks, investors have driven up trading volumes in China to astronomical levels, betting on everything from rebar to eggs. China traded enough steel in one day last month to build 178,082 Eiffel Towers and enough cotton to make at least one pair of jeans for every person on the planet.

Admittedly, numbers such as these should give any sober individual cause for concern. They are an obvious symptom of the global phenomenon of worthless, paper currencies being used to pump-up, manipulate, and destabilize our markets – to a degree never before seen in the history of our species. However, singling out China’s markets as being “prone to bubbles” represents hypocritical blindness on the part of the U.S. media which is too absurd to be accidental.

In the United States, there is a little thing called “the derivatives market”. The “notional value” of this market is somewhere in excess of $1.5 quadrillion – more than 20 times larger than the entire, global economy.

We’re no longer sure of the actual size of humanity’s single, largest bubble, because when this bubble first exceeded $1 quadrillion in notional value (back in 2010), the banking crime syndicate simply changed its “definition” of this so-called market, and overnight the (supposed) notional value shrunk by roughly 50%. The U.S. derivatives markets is the proverbial “mountain”, beside which China’s markets are mere mole-hills.

Of course what the Big Banks call the derivatives markets is not actually a “market”, at all. It is simply History’s largest (and most-illegal) book-making operation . In China’s markets, like all global equity markets, most of the trading involves (at least in theory) tangible assets: equitable interests in corporations, physical commodities, etc.

In contrast, with the derivatives book-making operation, the banker “bookies” do nothing but place bets on anything-and-everything. There are no proprietary interests involved. This is how/why this book-making operation could ever become 20 times larger than the global economy, upon which this so-called “market” is based. It is nothing but naked gambling.

If there was one place in all the world’s markets which resembled a “Vegas casino” more than any other place on Earth, it is obviously the U.S. derivatives book-making operation. Of course, in actuality, the derivatives book-making operation is far more crooked than any Vegas casino, since it is totally corrupt.

Specifically, “the House” (i.e. the Big Banks who run this book-making operation) refuse to pay-up when they lose. In 2011; Greece defaulted on $100’s of billions of its national debt. All those billions were massively “insured” in the U.S. derivatives market, via so-called “credit default swaps”. Indeed, the total amount of this fake-insurance exceeds the total amount of Western debt being insured.

Furthermore, credit default swap gambling is based on long odds, where the pay-outs can often exceed 100:1 . When Greece defaulted on $100’s of billions in debt, it represented pay-outs in the $trillions, if not $10’s of trillions. Meanwhile, the banking crime syndicate “backs” all this gambling with only a microscopic fraction of the assets necessary to make such pay-outs.

The solution? The Big Banks, who not only operate but “regulate” this Crooked Casino simply decreed that “there was no default” when Greece defaulted on more than 75% of its debt, and thus they refused to pay to the holders of this “insurance”.

Of course there is an even easier way of exposing how/why U.S. asset bubbles dwarf China’s asset bubbles, in any and every respect. Here the mainstream media is only too happy to assist us, with more of its China-bashing propaganda.

The issue is surplus liquidity – what’s been described as China’s “great ball of money,” which bounces around from asset class to asset class as if in a pinball machine…By now, credit and money growth has far outstripped any good opportunities for investment in China’s real economy, which is hobbled by excess capacity. [emphasis mine]

Yes, the issue is surplus liquidity. Follow the money. But let’s take a look and see whose “great ball of money is larger” – China’s or the U.S.’s?

 

Above, we see a slowly expanding curve. Below, we see the Bernanke “helicopter drop”, representing (by far) the most-excessive injection of “surplus liquidity” ever seen in the history of human commerce. However, this is not a full depiction of the greater size of the U.S.’s “great ball of money”.

First of all, as regular readers are well aware, the chart above has been falsified. Below is the last, legitimate representation of the U.S. money supply [note: the U.S.’s “adjusted monetary base” is equivalent to its “M0 money supply”.]

That is still a partial glimpse of the U.S.’s Great Ball of (Funny) Money. How excessive was/is the U.S.’s “surplus liquidity”, in total? How far has U.S. funny-money growth “outstripped any good opportunities for investment”? We see something which is supposed to be theoretically impossible, in anything remotely resembling legitimate markets. We see the U.S. with simultaneously its largest-ever stock market bubbles and its largest-ever bond bubble.

It is one of the most fundamental principles of markets that stock markets and bond markets are counter-cyclical: when one goes up, the other goes down. Thus it is impossible to ever have simultaneous bubbles in both of these markets…or at least it’s supposed to be impossible.

How can these insane/impossible bubbles simultaneously exist in the U.S., not just for a period of months, but for several years? This utter perversion of markets (via money-printing) has been explained in previous commentaries.

It starts with the form of financial fraud which the bankers call “fractional-reserve banking” : conjuring vast quantities of additional funny-money into existence via nothing more than the act of “lending”. What many readers may still not realize, is that the (excessive) money-printing depicted in the charts above is only the initial flow of liquidity from the monetary tap.

In every fiat currency monetary system, the vast majority of all (funny) money created comes into existence via banks, and (primarily) Big Banks “lending” what does not exist . In the U.S. system of monetary fraud, for every $1 dollar of official money-printing received by a Big Bank, it is allowed to “lend” $35. This is $35 which does not exist – until it is “loaned” into existence, out of thin air. Pure fraud.

How can such fraud exist, systemically, in all our monetary systems? Simple. First, the banksters assigned the fraud a euphemistic label, so it doesn’t sound like an inherently illegal act. Then the banksters commanded their puppet politicians to decree that such fraud was legal, and even established fraud-ratios, as (supposed) limits on the extent of such monetary fraud.

Lastly, the mouthpieces of the Corporate media were/are instructed to characterize such obvious fraud as being legitimate, and even supposedly “necessary” for our economic survival. Yes, the only way for humanity’s economies and societies to survive is to base their commerce on absurd, systemic, monetary fraud, which (as a matter of basic arithmetic) is guaranteed to catastrophically implode over time.

However, this is still just the tip of the iceberg regarding U.S. monetary fraud, and the actual size of its Great Ball of Money, a financial wrecking-ball beside which every other “great ball of money” (including China’s) pales into insignificance. The U.S.’s fractional-reserve fraud is literally multiplied by the additional fraud known as “0% lending” – another inherent act of financial/monetary crime.

In China, which has legitimate interest rates in its monetary system, additional (funny) money is also created via fractional-reserve fraud. But because these additional billions in funny-money are conjured into existence at real rates of interest , requiring additional funding to service such debts, such increases in the supply of funny-money are finite.

In the U.S. system of monetary fraud, where (for seven years) the Federal Reserve “loaned” money to the Big Banks with no interest attached, the capacity for the Big Banks to conjure (i.e. counterfeit) additional $trillions is literally infinite . Via the combined fraud of fractional-reserve banking and “0% lending”, just three of the Big Bank tentacles working together could (legally) counterfeit $1 quadrillion. If merely five of the One Bank’s tentacles conspired in this counterfeiting, they could (legally) conjure $1 quintillion. Etc.

The U.S.’s Great Ball of (counterfeit) Money is infinite in size. It explains the “impossible” co-bubbles in stocks and bonds. With infinite “surplus liquidity” in U.S. markets, we can have a high-tide, simultaneously, in all asset classes. This brings us to one, final point.

With the Western banking crime syndicate in control of the U.S.’s infinite Great Ball of Funny-Money, not only can the banksters simultaneously pump-up all U.S. asset classes to bubble levels, they can pump-up all markets, everywhere. While the Corporate media talks about Chinese “investors” having pumped absurd amounts of capital into its markets, the real culprits could be Western bankers.

Yes, the U.S. bubbles are larger, and much more insane/precarious than China’s bubbles. But the real point here is that what we are calling “China’s bubbles” could simply be even more Western-based bubble-blowing.

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“He’s Burning Down The House” – Clinton Campaign Furious At Sanders Insistence On Democracy

While Donald Trump's run through the competition on his way to the presidential nomination was swift (as was his complete dismantling of the GOP establishment), Hillary Clinton hasn't fared as well in her quest for the Democratic nomination.

Bernie Sanders is giving Hillary fits, and she doesn't like it one bit that the Vermont Senator won't stop delivering his message until the final bell rings. Sanders has made it a point to do as much as he can to enact change in America, and it's obvious that Bernie will indeed fight until the very last primary, despite Clinton and her comrades constantly whining about it.

"This is the worst case scenario, and the one people feared the most. Unfortunately he's choosing the path of burning down the house. He continues with character attacks against Hillary. He continues with calling the Democratic party corrupt, and he not only risks damaging Hillary Clinton and the Democratic party but he's currently donig it." said a Clinton ally according to The Hill.

Clinton has the Democrat establishment so riled up, that prominent Senator Barbara Boxer had an epic meltdown in Nevada recently when Sanders' supporters chastised her while on stage.

 

In an interview on CNN, Clinton said "I will be the nominee for my party Chris, that is already done. There is no way that I won't be."

While it may be a done deal, the Sanders camp simply will not relent.

"In the past three weeks voters in Indiana, West Virginia and Oregon respectfully disagreed with Secretary Clinton. We expect voters in the remaining eight contests also will disagree. With almost every national and state poll showing Sen. Sanders doing much, much better than Secretary Clinton against Donald Trump, it is clear that millions of Americans have growing doubts about the Clinton campaign." said Sanders' campaign spokesman Michael Briggs said in a statement.

While there is one way that Clinton won't be the nominee, we do suspect that in the end Hillary will be facing off against Donald in the Fall. Watching the complete implosion of both the GOP and Democratic establishment has been worth the time.

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Weekend Reading: Yellen’s Line In The Sand

Submitted by Lance Roberts via RealInvestmentAdvice.com,

This past week, the big news for the market was the release of the April 27th FOMC minutes which once again suggested the Federal Reserve may be on a path to hike rates sooner rather than later. The reality is simple, with the markets hovering on critical support, a Presidential election just around the corner and no real evidence of economic recovery, the likelihood of a rate hike in June is approaching zero.

Here are some key highlights from the meeting minutes:

Participants generally agreed that the risks to the economic outlook posed by global economic and financial developments had receded over the inter-meeting period.

 

Participants also raised concerns about “unanticipated developments” associated with how China manages its exchange rate.

Still, Fed officials signaled they weren’t overly worried about the apparent [Q1 GDP] slump, judging it was temporary and “could partly reflect measurement problems and, if so, would likely be following by stronger [gross domestic product] growth in subsequent quarters.

 

The view wasn’t unanimous. Some officials worried that softness in consumer spending and declines in business investment may be a sign of a more persistent slowdown in economic activity.”

There is a tremendous amount of “hope” built into those statements. And despite the continuing call of economic growth which has remained terminally elusive, the Federal Reserve is faced with numerous challenges ahead.

The central bank already missed the “window of opportunity” for normalizing rates in a manner that doesn’t hamper the recovery. This is evident when you look at Janet Yellen’s proprietary index that Yellen herself has stated as critical for Fed movement.

LMCI-chart-momentum2

As I have repeated discussed in the past, since payrolls tend to track corporate profits by about six months AND the small business confidence gauges are in decline, there will be weakening, not strengthening, in employment as the year progresses.

Such a slowing in payrolls will put the Fed in a difficult position since their entire premise on hiking rates has been a rise in inflation to 2% and a fall to 5% in unemployment. Both have now been achieved. This is why, when combined with a forthcoming Presidential election, the Fed will likely remain quite permanently on hold.

As Rick Reider at Blackrock recently summed up:

“To be sure, we live in a world that always has risks and headwinds. But given the many headwinds to Fed movement today, the central bank could have taken the opportunity to move earlier in the year when the headwinds weren’t as strong and it was being aided by historically easy global monetary policy in Europe and Japan.

 

Now, the central bank is left with a more difficult set of decisions going forward, as it weighs the costs and benefits of maintaining interest rates at ’emergency conditions.’”

For Yellen, it is critical the market holds the current level of support. A break below that level will certainly send markets lower looking to retest February lows once again while completely derailing the Fed’s plans for hiking rates.

Anyway, here is your reading list for the weekend.


CENTRAL BANKING & CHINA


THE MARKET & ECONOMY


INTERESTING READS


“The increase in the assets of the Federal Reserve Banks from 143 million dollars in 1913 to 45 billion dollars in 1949 went directly to the private stockholders of the [Federal Reserve] banks.” – Eustace Mullins

Some things never change.

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Hawkish Fed Slams Stocks To Longest Losing Streak In 20 Months

With the stock markets vertical drops and pops this week, the following just seemed appropriate…

 

Since The FOMC Minutes, the long bond is leading the way with stocks, gold, and oil lower…

 

Post FOMC – Nasdaq and Small Caps led the gains with Dow the biggest loser…

 

Despite the best efforts to keep the S&P green for the week (with VIX slammed)…

 

The Dow closed red for the 4th week in a row – the longest losing streak since Oct 2014's Bullard Bounce lows…

 

The Dow was the week's underperformer as Trannies surged over 2%… Nasdaq broke its 5 week losing streak with AAPL up 5%!!

 

But Futures shows the chaos of the week…

 

Massive redemptions hit high yield credit markets again (yesterday was the largest daily HYG outflow ever!)

 

Treasury yields rose across the complex this week but 30Y notably outperformed…

 

With 30Y outperforming post-FOMC…

 

With 2s30s flattening a dramatic 5bps…

 

The USD Index flatlined today but ended the week up 0.7%…

 

 

The strong dollar weighed on commodities but crude rallied on the week.

 

Don't forget – it's OPEX!

 

Charts: Bloomberg

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Leaking Las Vegas: Lake Mead Plunges To Lowest Level Ever As “The Problem Is Not Going Away”

The hopes of an El Nino-driven refill from last summer's plunging levels of the nation's largest reservoir have been dashed as AP reports Lake Mead water levels drop to new record lows (since it was filled in the 1930s) leaving Las Vegas facing existential threats unless something is done. Las Vegas and its 2 million residents and 40 million tourists a year get almost all their drinking water from the Lake and at levels below 1075ft, the Interior Department will be forced to declare a "shortage," which will lead to significant cutbacks for Arizona and Nevada. As one water research scientist warned, "this problem is not going away and it is likely to get worse, perhaps far worse, as climate change unfolds."

As USA Today reports, the nation’s largest reservoir has broken a record, declining to the lowest level since it was filled in the 1930s.

Lake Mead reached the new all-time low on Wednesday night, slipping below a previous record set in June 2015.

 

The downward march of the reservoir near Las Vegas reflects enormous strains on the over-allocated Colorado River. Its flows have decreased during 16 years of drought, and climate change is adding to the stresses on the river.

 

As the levels of Lake Mead continue to fall, the odds are increasing for the federal government to declare a shortage in 2018, a step that would trigger cutbacks in the amounts flowing from the reservoir to Arizona and Nevada. With that threshold looming, political pressures are building for California, Arizona and Nevada to reach an agreement to share in the cutbacks in order to avert an even more severe shortage.

 

“This problem is not going away and it is likely to get worse, perhaps far worse, as climate change unfolds,” said Brad Udall, a senior water and climate research scientist at Colorado State University. “Unprecedented high temperatures in the basin are causing the flow of the river to decline. The good news is that we have time and the smarts to manage this, if all the states work together.”

 

He said that will require “making intelligent but difficult changes to how we have managed the river in the past.”

 

As of Thursday afternoon, the lake’s level stood at an elevation of about 1,074.6 feet.

Lake Mead water levels sink to a new record low – notably ahead of the seasonally-normal lows…

Under the federal guidelines that govern reservoir operations, the Interior Department would declare a shortage if Lake Mead’s level is projected to be below 1,075 feet as of the start of the following year. In its most recent projections, the Bureau of Reclamation calculated the odds of a shortage at 10 percent in 2017, while a higher likelihood – 59 percent – at the start of 2018.

But those estimates will likely change when the bureau releases a new study in August. Rose Davis, a public affairs officer for the Bureau of Reclamation, said if that study indicates the lake’s level is going to be below the threshold as of Dec. 31, a shortage would be declared for 2017.

That would lead to significant cutbacks for Arizona and Nevada. California, which holds the most privileged rights to water from the Colorado River, would not face reductions until the reservoir hits a lower trigger point.

 

As AP concludes,

Officials in Nevada, Arizona and California are working on a deal to keep water in the lake by giving up some of their Colorado River water.

 

The river serves about 40 million residents in seven Southwest states. Two key points are lakes Powell and Mead, the largest reservoir in the system.

 

Lake Mead's high-water capacity is 1,225 feet above sea level. It reaches so-called "dead pool" at just under 900 feet, meaning nothing would flow downstream from Hoover Dam.

As population growth and heavy demand for water collide with hotter temperatures and reduced snowpack in the future, there will be an even greater mismatch between supply and demand, said Kelly Sanders, an assistant professor at the University of Southern California who specializes in water and energy issues.

“The question becomes how to resolve this mismatch across states that all depend on the river to support their economic growth,” Sanders said. She expects incentives and markets to help ease some of the strains on water supplies, “but it is going to be tricky to make the math work in the long term.”

via http://ift.tt/20gtuHc Tyler Durden

One Year Later…

It has now been one year since The S&P 500 reached record highs – proclaimed by all as proof that the recovery was real and that 2008 was dim and dismal thing of the past that could never happen again…

Small Caps (-11.65%) and Trannies (-10.25%) are the worst performers since the S&P peaked on May 21st 2015 closing at an all-time high of 2130.82

 

Energy stocks are the biggest laggard while utilities lead over the past year…

 

This is the longest period without a new high being reached since the crisis trough, as The Fed balance sheet has stagnated…

 

Leaving the S&P 500 back at its "most expensive" to The Fed Balance Sheet since the end of QE3…

 

But what else has changed…

Bonds +5.3%, dollar barely changed, global stocks -8.2%, commodities -22.3%…

 

Despite massive QE programs both euro & yen up versus US dollar (astonishing)…

 

Despite Fed hike & low yields long-end in US, Japan, Germany has rallied 10%, 18% & 9% respectively…

 

In The US, only the 2Y rate is hgher since the peak in the US equity market…With rates plunging policy-error-like since The Fed hiked rates…

Eurozone bank stocks back to ‘08 (Lehman bankruptcy) & 2012 (Greek default) lows, Japanese banks are down 30%, Chinese banks down 40%…

McDonald’s has been the best performing stock in the Dow Jones, Apple the worst…

 

But what about the fundamentals…

In the year since the peak in stocks, 2016 GDP growth expectations have collapsed… and along with them the yield curve, but stocks remain undeterred…

 

Earnings are ugly and Industrial Production plunging….

 

And inventories are soaring as the deflationary impulse of easy-money-enabled zombie production gluts a world with overcapacity when sales are lagging…

As BofAML concludes, we remain convinced "Twilight Zone" asset market performance is driven by end of QE3 & fears that an overvalued Wall St & deflationary Main St simply cannot handle higher rates.

via http://ift.tt/1TkgcdY Tyler Durden

One Year Later…

It has now been one year since The S&P 500 reached record highs – proclaimed by all as proof that the recovery was real and that 2008 was dim and dismal thing of the past that could never happen again…

Small Caps (-11.65%) and Trannies (-10.25%) are the worst performers since the S&P peaked on May 21st 2015 closing at an all-time high of 2130.82

 

Energy stocks are the biggest laggard while utilities lead over the past year…

 

This is the longest period without a new high being reached since the crisis trough, as The Fed balance sheet has stagnated…

 

Leaving the S&P 500 back at its "most expensive" to The Fed Balance Sheet since the end of QE3…

 

But what else has changed…

Bonds +5.3%, dollar barely changed, global stocks -8.2%, commodities -22.3%…

 

Despite massive QE programs both euro & yen up versus US dollar (astonishing)…

 

Despite Fed hike & low yields long-end in US, Japan, Germany has rallied 10%, 18% & 9% respectively…

 

In The US, only the 2Y rate is hgher since the peak in the US equity market…With rates plunging policy-error-like since The Fed hiked rates…

Eurozone bank stocks back to ‘08 (Lehman bankruptcy) & 2012 (Greek default) lows, Japanese banks are down 30%, Chinese banks down 40%…

McDonald’s has been the best performing stock in the Dow Jones, Apple the worst…

 

But what about the fundamentals…

In the year since the peak in stocks, 2016 GDP growth expectations have collapsed… and along with them the yield curve, but stocks remain undeterred…

 

Earnings are ugly and Industrial Production plunging….

 

And inventories are soaring as the deflationary impulse of easy-money-enabled zombie production gluts a world with overcapacity when sales are lagging…

As BofAML concludes, we remain convinced "Twilight Zone" asset market performance is driven by end of QE3 & fears that an overvalued Wall St & deflationary Main St simply cannot handle higher rates.

via http://ift.tt/1TkgcdY Tyler Durden